Hello, I’m a beginner at both DSGE modeling and Dynare. In the course of my studies, a question has often troubled me: Does a log-linearized model require the computation of steady states when running it in Dynare? My understanding is that although the steady-state values of log-linearized variables are all zero, the steady states of the original variables still need to be assigned, thus requiring the computation of the original variables’ steady states. However, after reviewing posts on forums, I found some friends claiming that log-linearized models do not require steady-state calculations, which has left me confused. Could you clarify this for me?
In general you are correct that the steady state values of the nonlinear model are required as they enter the linearized model equations as parameters. But there are cases where all these coefficients drop out. For example, if your model is purely multiplicative, all the steady states will drop out. An example of this is the three equation NK model.
Thank you for your answer, I understand how it works now 