Adding shocks and Steady state


I have a simple closed economy NK model in dynare that works perfectly. I am trying to expand this code to solve a model that I have myself. One of the expansions to this code is addition of some shocks. As soon as I add these shocks the code deosn’t run anymore and gives me the steady state error. This very strange because just to examine what the problem is, I only added the shock process, and didn’t start using it in the model, and to check I have even givn it the same value for rho and sigma as another shock. So effectively the shock that I have added is exactly the same as another shock that already works. But dynare gives error.

I have attached both the main matlab and dynare files (initial values are linked from the matlab file so it’s easier to run it from there).

The new shock I’ve added is eps_l.

I have both dynare 4.3.3 and 4.4 and with both I get this error. I have tried with and without giving options to steady, steady(solve_algo=4,maxit=10000).

I would be so grateful if someone could give me a clue as what the problem could be.

main.m (2 KB)
nk3.mod (4.74 KB)

You call a script steady_state, but did not provide it. Without it, I cannot run your code.

Ah, yes, sorry. It’s attached now.
steady_state.m (1.98 KB)

Here is the dynare code without the aforementioned extra shock, and this runs without a problem.
nk2.mod (4.58 KB)

There is a bug in solve_algo=4 that suggested convergence for the steady state when I was not yet achieved. If you use

the file nk3 also runs.

Yes, that works now. Thank you very much!