diff --git a/DynamicModel.cc b/DynamicModel.cc
index 04c437bfcb729e043aa92c0ec1950f1068668464..c44dd26d9fb02a2f749c225209edc150a536371c 100644
--- a/DynamicModel.cc
+++ b/DynamicModel.cc
@@ -4203,11 +4203,11 @@ DynamicModel::testTrendDerivativesEqualToZero(const eval_context_t &eval_context
                     double nearZero = testeq->getDerivative(endogit->second)->eval(eval_context); // eval d F / d Trend d Endog
                     if (fabs(nearZero) > ZERO_BAND)
                       {
-                        cerr << "ERROR: trends not compatible with balanced growth path; the second-order cross partial of equation " << eq + 1 << " (line "
+                        cerr << "WARNING: trends not compatible with balanced growth path; the second-order cross partial of equation " << eq + 1 << " (line "
                              << equations_lineno[eq] << ") w.r.t. trend variable "
                              << symbol_table.getName(it->first.first) << " and endogenous variable "
                              << symbol_table.getName(endogit->first.first) << " is not null. " << endl;
-                        exit(EXIT_FAILURE);
+                        // Changed to warning. See discussion in #1389
                       }
                   }
             }
diff --git a/DynareBison.yy b/DynareBison.yy
index dc3efef4bec01bfd6373d6a9f95987e57a163e3a..39cff55ba7fe630a09845710a421d764f1607459 100644
--- a/DynareBison.yy
+++ b/DynareBison.yy
@@ -113,7 +113,7 @@ class ParsingDriver;
 %token CPF_WEIGHTS AMISANOTRISTANI MURRAYJONESPARSLOW WRITE_EQUATION_TAGS METHOD
 %token NONLINEAR_FILTER_INITIALIZATION FILTER_ALGORITHM PROPOSAL_APPROXIMATION CUBATURE UNSCENTED MONTECARLO DISTRIBUTION_APPROXIMATION
 %token <string_val> NAME
-%token USE_PENALIZED_OBJECTIVE_FOR_HESSIAN INIT_STATE
+%token USE_PENALIZED_OBJECTIVE_FOR_HESSIAN INIT_STATE RESCALE_PREDICTION_ERROR_COVARIANCE
 %token NAN_CONSTANT NO_STATIC NOBS NOCONSTANT NODISPLAY NOCORR NODIAGNOSTIC NOFUNCTIONS NO_HOMOTOPY
 %token NOGRAPH POSTERIOR_NOGRAPH POSTERIOR_GRAPH NOMOMENTS NOPRINT NORMAL_PDF SAVE_DRAWS MODEL_NAME
 %token OBSERVATION_TRENDS OPTIM OPTIM_WEIGHTS ORDER OSR OSR_PARAMS MAX_DIM_COVA_GROUP ADVANCED OUTFILE OUTVARS OVERWRITE
@@ -143,7 +143,7 @@ class ParsingDriver;
 %token ASINH ACOSH ATANH SQRT NORMCDF NORMPDF STEADY_STATE EXPECTATION
 /* GSA analysis */
 %token DYNARE_SENSITIVITY MORRIS STAB REDFORM PPRIOR PRIOR_RANGE PPOST ILPTAU MORRIS_NLIV
-%token MORRIS_NTRA NSAM LOAD_REDFORM LOAD_RMSE LOAD_STAB ALPHA2_STAB KSSTAT LOGTRANS_REDFORM THRESHOLD_REDFORM
+%token MORRIS_NTRA NSAM LOAD_REDFORM LOAD_RMSE LOAD_STAB ALPHA2_STAB LOGTRANS_REDFORM THRESHOLD_REDFORM
 %token KSSTAT_REDFORM ALPHA2_REDFORM NAMENDO NAMLAGENDO NAMEXO RMSE LIK_ONLY VAR_RMSE PFILT_RMSE ISTART_RMSE
 %token ALPHA_RMSE ALPHA2_RMSE
 /* end of GSA analysis*/
@@ -1851,6 +1851,7 @@ estimation_options : o_datafile
                    | o_posterior_sampler_options
                    | o_keep_kalman_algo_if_singularity_is_detected
                    | o_use_penalized_objective_for_hessian
+                   | o_rescale_prediction_error_covariance
                    ;
 
 list_optim_option : QUOTED_STRING COMMA QUOTED_STRING
@@ -2510,7 +2511,6 @@ dynare_sensitivity_option : o_gsa_identification
                           | o_gsa_load_rmse
                           | o_gsa_load_stab
                           | o_gsa_alpha2_stab
-                          | o_gsa_ksstat
                           | o_gsa_logtrans_redform
                           | o_gsa_ksstat_redform
                           | o_gsa_alpha2_redform
@@ -3148,7 +3148,6 @@ o_gsa_load_redform : LOAD_REDFORM EQUAL INT_NUMBER { driver.option_num("load_red
 o_gsa_load_rmse : LOAD_RMSE EQUAL INT_NUMBER { driver.option_num("load_rmse", $3); };
 o_gsa_load_stab : LOAD_STAB EQUAL INT_NUMBER { driver.option_num("load_stab", $3); };
 o_gsa_alpha2_stab : ALPHA2_STAB EQUAL non_negative_number { driver.option_num("alpha2_stab", $3); };
-o_gsa_ksstat : KSSTAT EQUAL non_negative_number { driver.option_num("ksstat", $3); };
 o_gsa_logtrans_redform : LOGTRANS_REDFORM EQUAL INT_NUMBER { driver.option_num("logtrans_redform", $3); };
 o_gsa_threshold_redform : THRESHOLD_REDFORM EQUAL vec_value_w_inf { driver.option_num("threshold_redform",$3); };
 o_gsa_ksstat_redform : KSSTAT_REDFORM EQUAL non_negative_number { driver.option_num("ksstat_redform", $3); };
@@ -3395,6 +3394,7 @@ o_mcmc_jumping_covariance : MCMC_JUMPING_COVARIANCE EQUAL HESSIAN
                           | MCMC_JUMPING_COVARIANCE EQUAL filename
                             { driver.option_str("MCMC_jumping_covariance", $3); }
                           ;
+o_rescale_prediction_error_covariance : RESCALE_PREDICTION_ERROR_COVARIANCE { driver.option_num("rescale_prediction_error_covariance", "true"); };
 o_use_penalized_objective_for_hessian : USE_PENALIZED_OBJECTIVE_FOR_HESSIAN { driver.option_num("hessian.use_penalized_objective","true"); };
 o_irf_plot_threshold : IRF_PLOT_THRESHOLD EQUAL non_negative_number { driver.option_num("impulse_responses.plot_threshold", $3); };
 o_dr_display_tol : DR_DISPLAY_TOL EQUAL non_negative_number { driver.option_num("dr_display_tol", $3); };
diff --git a/DynareFlex.ll b/DynareFlex.ll
index 93f09065d4be584c1989b5450bb85cf9df7e0eb1..88de8f3571d2cc28595a8533153c809e9737aa77 100644
--- a/DynareFlex.ll
+++ b/DynareFlex.ll
@@ -410,6 +410,7 @@ DATE -?[0-9]+([YyAa]|[Mm]([1-9]|1[0-2])|[Qq][1-4]|[Ww]([1-9]{1}|[1-4][0-9]|5[0-2
 <DYNARE_STATEMENT>distribution_approximation {return token::DISTRIBUTION_APPROXIMATION;}
 <DYNARE_STATEMENT>proposal_distribution {return token::PROPOSAL_DISTRIBUTION;}
 <DYNARE_STATEMENT>no_posterior_kernel_density {return token::NO_POSTERIOR_KERNEL_DENSITY;}
+<DYNARE_STATEMENT>rescale_prediction_error_covariance {return token::RESCALE_PREDICTION_ERROR_COVARIANCE;}
 <DYNARE_STATEMENT>use_penalized_objective_for_hessian {return token::USE_PENALIZED_OBJECTIVE_FOR_HESSIAN;}
 
 <DYNARE_STATEMENT>alpha {
@@ -806,7 +807,6 @@ DATE -?[0-9]+([YyAa]|[Mm]([1-9]|1[0-2])|[Qq][1-4]|[Ww]([1-9]{1}|[1-4][0-9]|5[0-2
 <DYNARE_STATEMENT>load_rmse {return token::LOAD_RMSE;}
 <DYNARE_STATEMENT>load_stab {return token::LOAD_STAB;}
 <DYNARE_STATEMENT>alpha2_stab {return token::ALPHA2_STAB;}
-<DYNARE_STATEMENT>ksstat {return token::KSSTAT;}
 <DYNARE_STATEMENT>logtrans_redform {return token::LOGTRANS_REDFORM;}
 <DYNARE_STATEMENT>threshold_redform {return token::THRESHOLD_REDFORM;}
 <DYNARE_STATEMENT>ksstat_redform {return token::KSSTAT_REDFORM;}
diff --git a/ModFile.cc b/ModFile.cc
index 6afd8ba252f6a5e088a84cd38813033bd3d0d97e..6f99f904d55c7f9f6ae13452811089ba93622478 100644
--- a/ModFile.cc
+++ b/ModFile.cc
@@ -144,7 +144,7 @@ ModFile::checkPass(bool nostrict)
   if ((mod_file_struct.ramsey_model_present || mod_file_struct.ramsey_policy_present)
       && mod_file_struct.discretionary_policy_present)
     {
-      cerr << "ERROR: You cannot use the discretionary_policy command when you use either rasmey_model or ramsey_policy and vice versa" << endl;
+      cerr << "ERROR: You cannot use the discretionary_policy command when you use either ramsey_model or ramsey_policy and vice versa" << endl;
       exit(EXIT_FAILURE);
     }