Adding delinquency on Working Capital

Stochastic simulations
1

Hello everybody,
I changed the working capital model in McCandless (2008) in order that default in loans may occur.

I’m having some trouble with some nominal variables, as follows:
risky_loan_1_7.mod (1.9 KB)

THEORETICAL MOMENTS
VARIABLE MEAN STD. DEV. VARIANCE
y 0.0000 0.0197 0.0004
c 0.0000 0.0214 0.0005
inv 0.0000 0.0491 0.0024
l 0.0000 0.0123 0.0002
w 0.0000 0.0213 0.0005
r 0.0000 0.0138 0.0002
k 0.0000 0.0222 0.0005
p NaN NaN NaN
rn 0.0000 0.0023 0.0000
rf 0.0000 0.0101 0.0001
m NaN NaN NaN
n NaN NaN NaN
z 0.0000 0.0074 0.0001
g 0.0000 0.0023 0.0000
eta 0.0000 0.0100 0.0001

Thank you so much
Alves

2

Hi, you have unit roots in this model. The unconditional moments which are not defined (because of the unit roots) are replaced by NaN in the table. So the output is not wrong.

Best,
Stéphane.

1 Like
3

Thanks for your help, Stéphane

4

Hello,

I’m habing some trouble to get a stable solution for the modelin level. Do you have any guess?

Thanks
Alves

risky_loan_1_7_1_nivel.mod (1.8 KB)

5

You must not put
steady
before your
initval-block

6

Hello professor,
I changed it. It’s still not finding a steady state.
Thanks for your help
Alves
risky_loan_1_7_1_nivel.mod (1.7 KB)

7

Investigate the equations with the biggest residuals. From your other posts, I infer you already solved the problem.

8

Yes, professor Pfeifer, the models are improving. Thanks for your help!
Best,
Alves