Hello - I am trying to replicate something along the lines of Chari, Kehoe McGrattan (2007): that is, a DSGE model with wedges. These wedges arise from an underlying stochastic process. One reads in data to recover this process (assumed Markov), and then uses the equilibrium conditions of the model to back out the implied wedges.

I’m having a problem defining the steady state of the model. The issue is that the SS values of k, y, c etc. all depend on the SS values of the endogenous wedges. But these in turn are estimated. However, one needs SS values of model variables to do the estimation.

I am trying to use a `steady_state_model`

block to define the SS. I understand that an alternative is to write a steady state file myself, but I’m not sure how this would improve matters. I am having trouble conceptually specifying how dynare can find the SS in this case.