Hi, all,

I’m trying to find the optimal macroprudential and monetary rules in a DSGE model using optimal simple rules.

However I obtained a multiple of warnings as follows:

Configuring Dynare …

[mex] Generalized QZ.

[mex] Sylvester equation solution.

[mex] Kronecker products.

[mex] Sparse kronecker products.

[mex] Local state space iteration (second order).

[mex] Bytecode evaluation.

[mex] k-order perturbation solver.

[mex] k-order solution simulation.

[mex] Quasi Monte-Carlo sequence (Sobol).

[mex] Markov Switching SBVAR.

Using 64-bit preprocessor

Starting Dynare (version 2015-10-23).

Starting preprocessing of the model file …

Substitution of endo lags >= 2: added 4 auxiliary variables and equations.

Found 83 equation(s).

Evaluating expressions…done

Computing static model derivatives:

- order 1

Computing dynamic model derivatives: - order 1
- order 2

Processing outputs …

done

Preprocessing completed.

OPTIMAL SIMPLE RULE

OSR: Initial value of the objective function: 30.1947

## f at the beginning of new iteration, 30.1946739199

Predicted improvement: 0.133201213

lambda = 1; f = 29.9297296

lambda = 1.9332; f = 29.6850440

lambda = 3.7372; f = 29.2186078

lambda = 7.2247; f = 28.3387215

lambda = 13.967; f = 26.6940188

lambda = 27; f = 103423018.0523657

lambda = 18.18; f = 25.6739418

lambda = 23.049; f = 101859488.5679415

lambda = 19.99; f = 100134318.3320013

lambda = 18.354; f = 25.6315359

lambda = 19.319; f = 25.3943247

lambda = 20.335; f = 100327449.5864580

lambda = 19.719; f = 25.2953508

lambda = 20.086; f = 100188043.3105255

lambda = 19.865; f = 100064119.4085202

Norm of dx 0.0051614

## Improvement on iteration 1 = 4.899323116

warning: possible inaccuracy in H matrix

f at the beginning of new iteration, 25.2953508037

Predicted improvement: 29.750447518

lambda = 1; f = 100554997.7040317

lambda = 0.33333; f = 103423018.0523658

lambda = 0.11111; f = 103423018.0523656

lambda = 0.037037; f = 103423018.0523656

lambda = 0.012346; f = 101664723.0438191

lambda = 0.0041152; f = 100540719.5171381

lambda = 0.0013717; f = 100168255.6644537

lambda = 0.00045725; f = 100044268.4353072

lambda = 0.00015242; f = 100002955.6048355

lambda = 5.0805e-005; f = 25.2923052

lambda = 9.8216e-005; f = 25.2894634

lambda = 0.00018987; f = 100008031.1053914

Warning: Matrix is close to singular or badly

scaled.

Results may be inaccurate. RCOND =

8.287261e-018.

In dyn_first_order_solver at 314

In stochastic_solvers at 238

In resol at 141

In osr_obj at 48

In csminit1 at 140

In csminwel1 at 118

In dynare_minimize_objective at 203

In osr1 at 102

In osr at 60

In e at 981

In dynare at 223

lambda = 0.00012785; f = 25.2883736

lambda = 0.00016209; f = 100004266.2215708

lambda = 0.00014058; f = 100001351.2700622

Warning: Matrix is close to singular or badly

scaled.

Results may be inaccurate. RCOND =

4.201578e-018.

In dyn_first_order_solver at 314

In stochastic_solvers at 238

In resol at 141

In osr_obj at 48

In csminit1 at 140

In csminwel1 at 118

In dynare_minimize_objective at 203

In osr1 at 102

In osr at 60

In e at 981

In dynare at 223

lambda = 0.00012907; f = 25.2851655

lambda = 0.00013585; f = 100000711.3056649

lambda = 0.00013174; f = 100000153.7416213

Warning: Matrix is close to singular or badly

scaled.

Results may be inaccurate. RCOND =

3.495697e-018.

In dyn_first_order_solver at 314

In stochastic_solvers at 238

In resol at 141

In osr_obj at 48

In csminit1 at 140

In csminwel1 at 118

In dynare_minimize_objective at 203

In osr1 at 102

In osr at 60

In e at 981

In dynare at 223

lambda = 0.00012933; f = 25.2870071

Warning: Matrix is close to singular or badly

scaled.

Results may be inaccurate. RCOND =

7.934372e-019.

Can somebody please explain what this means and what I can do about it? Thanks!