I am attempting to solve the Ramsey policy of a rent-seeking policymaker in a DSGE model with heterogenous households and firms. Upon solving with Dynare 4.5.7, I get the warning and error messages saying:
warning: division by zero
error: Ramsey: The steady state file computation for the Ramsey problem resulted in NaNs at the initial values of the instruments.
II have attached the codes. Please could you help go through it to point out the source(s) of this error? csae3.mod (2.7 KB)
After battIing with providing the accurate conditional steady-state of the Ramsey problem, I resorted to running a Linear Quadratic Ramsey code which resulted in the non-zero steady-state values below:
Approximated value of planner objective function
- with initial Lagrange multipliers set to 0: 6.6089
- with initial Lagrange multipliers set to steady state: 6.8
Does this make sense since I should be getting steady state values of 0 in a linear model?
Secondly, I ran another Linear Ramsey code where I obtained steady state values of 0. Does this imply that the steady state is non-distorted?