Hi everyone

I’m trying to numerically solve the system of equations from Uribe (2020)'s The Neo-Fisher Effect: Econometric Evidence from Models Empirical and Optimizing Models (paper in the attachments if needed). The model contains 8 equilibrium conditions and 6 shocks. I’ve attached screenshots of the model.

In the model, I’ve put exp() around all the variables so Dynare can linearise the model (I’ve also linearised everything by hand with a 1st-order Taylor expansion). Also, I’m not sure how correct my steady state is. And when I run my code, in the dak.mod file, I receive the following errors.

Error using print_info (line 32)

print_info(info,options_.noprint, options_);

Error in dk.driver (line 350)

Error in dynare (line 293)
evalin(‘base’,[fname ‘.driver’]) ;

Would anyone know if the code is written correctly for the model with exp() being around every variable to linearise the model? And, if the steady state is incorrect, how do I properly calculate it? Any other errors or advice? Any help on this would be greatly appreciated. Thank you.

dak.mod (6.4 KB) Equations|474x500
fisher.pdf (392.5 KB)

Also, the exogenous processes are already linear and mostly mean 0. There is no point in putting them in exp()

Thank you for your reply. As you can probably tell, I’m pretty new to Dynare. Thanks again.

Hi Professor Pfeifer,

I believe the model works; whenever I run the code it says Preprocessing completed and I end up with the residuals of the static equation. However, I still get the following error: “error: The steadystate file did not compute the steady state.”

I’ve linearised all the equations by hand and have included all the steady-state equations that either the author stated or that allowed me to log-linearise the variables. Is this the proper way to go about defining the steady state?

Also, certain variables (ie., wages (w), interest rate (int), pi_tilde) have two steady-state equations that I include in the steady-state block but get the following warning: “WARNING: in the ‘steady_state_model’ block, variable ‘w’ is declared twice.” I need the different equations (for the same variable) to linearise other equations. What do I do in this instance?

Lastly, is it correct for the shocks (z, xi, zm etc.) to be 0 at the steady state or do they have to take values? I’ve attached my updated mod.file.

Thanks again for your help, it’s greatly appreciated.

mem.mod (6.5 KB)

1. You did not linearize the model. All equations are nonlinear.
2. Only do the exp()-substitution once the model works.
3. You should not enter two equations for the steady state of variable. After all, the two ways need to return the same value.

Thank you for your reply. I didn’t realise the equations were still non-linear.