Dear community,
I hope this message finds you well. I am an undergraduate student from South Korea studying macroeconomics, and I am currently working on a DSGE model for a research project. I have referred to several previous studies to construct my DSGE model and aim to estimate the parameters and run simulations using Dynare.
After writing my model file, tt.mod, and running it in Dynare, I encountered an error message indicating that the Blanchard-Kahn conditions are not satisfied. I am unsure about how to proceed with parameter estimation in Dynare, especially as I am not entirely clear on how one can find a solution at the steady state without knowing the parameters in advance. To address this, I input the mean values of the prior distributions for the parameters in the steady_state_model block before attempting estimation.
My question is whether this approach—using the mean of the prior distributions to find a solution for the static equations—is correct. Additionally, I wonder if adjusting the parameter values to meet the steady-state conditions is a valid way to satisfy the Blanchard-Kahn conditions. Assuming that a solution exists, I would also like to know if my code, as it stands, will allow Dynare to perform accurate estimation.
Apologies for the lengthy question, and I greatly appreciate any assistance or guidance you could offer.
Thank you very much in advance for your kindness.
If you could, please see attached.
datafile.xlsx (15.4 KB)
tt.txt (2.3 KB)
Thank you so much in advance and have a great day!