Basic NK DSGE Model Help, Please

Dynare help (legacy posts)
1

Hello all,

I am an undergraduate economics student attempting to replicate a basic NK DSGE model with an added link between the government spending shock and technology shock. My model includes a simple monetary policy rule consisting of a constant growth rate for the money supply instead of an interest rate rule. I am trying to demonstrate the effects of seignorage financing of government investment.

I am unable to get the model attached to work. I would really appreciate it if anyone is able to help me with correcting the attached code.

Thanks very much for viewing my query.

Best regards,

A. Fathalla
AFdraft1.mod (1.16 KB)
Model_Equations_for_Dynare (1).pdf (78.8 KB)

2

You are simply missing one equation. You as the model builder need to find out what you are missing.

3

Thank you.

So I have tried adding the money demand equation in terms of consumption and how real balances in relation to inflation and money growth. Nevertheless, I am getting the error message:

Impossible to find the steady state. Either the model doesn’t have a steady state, there are an
infinity of steady states, or the guess values are too far from the solution

Thanks.
AFdraft2.mod (1.16 KB)

4

You need to sort out the constant terms. If you have

then

which seems inconsistent with the other equations.