A Toolkit for Models with Occasionally Binding Constraints

Luca Guerrieri and I have developed a Dynare compatible toolkit to solve models with occasionally binding constraints. The toolkit is available here


from my research webpage which is www2.bc.edu/matteo-iacoviello/research.htm

and contains extensive documentation and several example files, from models with ZLB to models with borrowing constraints to models with irreversible capital.

The background paper is here


Enjoy and comments welcome.

Matteo Iacoviello

Dear prof Iacoviello,

First of all, excellent work , as always.

I downloaded your toolkit and run same examples, just few remarks.

In the main file setpathdynare4 after


you have also to add
otherwise matlab does not rcognize the toolkit file in his path

b) The toolkit seems to work not only with 4.3.1 dynare version, but also with the 4.3.2 and the 4.3.3 (at least same examples and under a window machine).

Iā€™ am excited to further explore the potentiality of your toolbox.
Again , excellent work.


Dear prof. Iacoviello,
I am very interested in your toolkit for solving models with occasionally binding constraints. I have a few questions, which are related to the assumptions of the method.

  1. in file runsim_dnk.m baseline2=[ -0.04 -0.04 -0.04 -0.04 0 0
    0.00 0.00 0.00 0.00 0.0 0.0 ]ā€™;
    What are these numbers -0.04. Maybe preference shocks. Does this mean that shocks (preference and government expenditures) are perfectly observed (not random)?
  2. Can you shortly describe assuptions of the method (particularly about types of shocks, deterministic environment, disadvantages of the method).
    Thank you in advance for the answer!