Are there methods to enter the steady state other than using the initval commands

[Caths]

Dear Professor,

I’ve learn using the initval commands to enter the steady state even if the steady state is calculated on my own, while today I found a replication code using the form #zz to introduce the steady state. I’m really confused about how it work. Is the “#” form an another way to introduce the steady state?fbc1.mod (10.6 KB)
Thank you for your time. Have a nice day.

Catherine

[cmarch]

Dear Catherine,

That is simply the way Iacoviello uses to introduce the steady-state levels of the variables as model-local variables in the model. For instance, since the external portfolio adjustment costs and capital adjustment costs that feature in his model depend on the deviation from the steady-state levels of deposits, loans, and capital stock, he analytically derives the level of these variables in steady-state and introduces them in the model via model-local variables (i.e. using the \# sign) to be able to compute the adjustment costs in the dynamics.

[jpfeifer]

You also might want to refer to

Likelihood only!

Calibration only once updates the other parameters depending on the estimated one. That’s why you should use model-local variables (the ones with the pound operator) or a steady state file. See Remark 4 (Parameter dependence and the use of model-local variables) in Pfeifer(2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models” .

[Caths]

Thank you so much for your detailed and accurate explanation. Now I can understand each part of the code. Thanks again, and have a good day.

[Caths]

That is exactly a perfect material for me to have a better understanding of dynare!! Thank you for your help.