Always Binding Credit Constraint

Dear all

I’m trying to run a stochastic simulation with a credit constraint (inequality constraint), which is always binding if the interest rate r < 1/beta. But how can I put the inequality condition that r < 1/beta into my model in dynare?


I guess you can do it somehow with the perfect foreseight solution. But the best way is with Iacoviello and Guerrieri toolkit occbin. You can download it at Matteo’'s webpage.

1 Like

Thanks a lot for your answer, I will try that.

I am not sure I understand the question. The title talks about an always binding constraint. But then your description is about an occasionally binding constraint. @p.gelain’s suggestion is correct if you want to work under perfect foresight. Depending on what you are trying to do, the lmccp option in Dynare may also be an option. See

1 Like

Hi, If you need to simulate time series you can use the extended path approach (search for the extended_path command in the reference manual).


1 Like

Hey, thanks a lot for your replies. I made it run now. The credit constraint is always binding if the interest rate < 1/beta. And now with the (finally) correct model, this condition is always fulfilled for low parameter values for the credit constraint.

Again, thanks for your help.