Change Model From Annual to Quarterly

I try to solve the Schmitt_Grohe and Uribe (2003) EDEIR model using Professor Pfeifer’s code. I am able to solve the model using annual calibration but as soon as I change the calibration to quarterly, the code doesn’t work and gives the following error:

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 PS2_2 (line 268)

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

I don’t know what is the reason for it. I am attaching my mod file. Currently it’s with annual calibration (delta = 0.1, rstar = 0.04 and beta = 0.9605) and it works perfectly. But as soon as I change these values to delta = 0.025, rstar = 0.01 and beta = 0.9901, the codes gives the above error. Is there anything else I need to do to chnage the model to quarterly from annually? I am trying this code exercise because I want to calibrate this model to match quarterly business cycle data. So first I am trying if my model works or not. I have tried all the other plausible values of other parameters but I think the main problem is with delta. Any help with this would highly be appreciated. Thanks in advance!SGUEDEIR.mod (1.8 KB)

I am not sure what you exactly modified, but in my codes at
the psi_1 is adjusted to make the steady state work.

This is the EDEIR model. This is the model with psi_2, not psi_1 in your notation (You take 0.000742, as in the paper). I’m only adjusting beta, r and delta from annual to quarterly value. With any value of psi_2, the code doesn’t work. How should I adjust the value of psi or any other parameter to make the model quarterly?

Basically, my goal is to write the model in quarterly terms. In annual terms, with the parameter values you have taken, the code works exactly fine. But if I change the parameter values to quarterly values, the code doesn’t work. The only parameter values I am changing w.r.t. your codes are beta, r and delta. What else I need to change to make the quarterly model work?

Is there any reason why you do not use my mod-file with its steady_state_model-block? As you can see, your initval-block is error-prone.

Yeah, if I use your steady_state_model-block, the code works with quarterly values. I can’t see any mistake with my initval-block though

Hi Professor, what do you think is the problem with my initval-block?

I don’t know and I won’t spend time to figure it out given that its use is not recommended if a working steady_state_model-block exists.

So you would suggest, in general, to go with steady state block instead of initval block?

Of course. Why do you think I used it in my file? There is absolutely no advantage of using initval