Cannot find steady state!

Steady state
1

Dear Dynare Users,

I am quite new to Dynare and would really appreciate it if you could take a look at this code and let me know what I am missing. When I run the code, I get an error saying
Error using print_info (line 83)
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

Error in steady (line 104)
print_info(info,options_.noprint, options_);

Error in mymodel (line 239)
steady;

Error in dynare (line 235)
evalin(‘base’,fname) ;

mymodel.mod (2.0 KB)

2

Please only do an exp-substitution after the model runs.

exp(A)=SIGMA*exp(A(-1))+u;    %AR(1) Technology process

for example does not make sense. Here, exp(A) needs to be 0, which is requires A to be -Inf.

3

Dear Professor,

Thank you for your help. I have tried to run the model without exp and I am now getting a different error. I would really appreciate it if you could take a look.

TheresaRBC_noexp.mod.mod (3.2 KB)

4

You cannot remove all exp(). a still follows a lognormal process, so it must be

(y)=exp(a)*(k(-1)^alpha)*(l^(1-alpha));     %Production Function

There may be other instances like this.

5

Dear professor,

Thank you for taking the time to reply. We have updated some issues and the model runs, however, when we shock taxes or government - impulse response for debt shows an increase (instead of a decrease). We’ve re-checked our equations and are still not sure what could be causing this.

Would really appreciate your input.

rbc_debt_3.mod (3.1 KB)

6

How come that debt is not a predetermined variable in your model?

7

Our equations follow: https://www3.nd.edu/~esims1/fiscal_policy_sp2015.pdf

Our interpretation of the timing of debt in the government constraint is that what the government spends in this period depends on how much revenue is gained over the period and how much debt is increased over the period.

If we set debt as predetermined, Blanchard Kahn conditions are not satisfied

8

You can clearly see from the document that debt is predetermined. The derivative in the FOC is taken with respect to D_{t+1}. Have you tried the calibration in the document. With fiscal rules, the values of the parameters matter a lot for stability.

9

Dear Prof,

Thank you once again for your patience. We’ve adjusted the timing for D and changed a few of the parameters to match Sims…impulse responses are looking better now.

Thanks once again!