Hi there,

I run into one problem when I try to solve a small monetary union two-country model in nonlinear form (Benigno 2004). By hand, I calculated the zero-inflation steady-state (Piss=1) and then solved for the steady state of all other remaining variables. I give dynare the calculated values as initial values. Dynare also solves the model and finds a steady-state. However, in the dynare steady-state, ss inflation is 0.97 instead of 1. Some other steady state values are the logically different, too. Can I force dynare to take my zero inflation steady state and linearize the model around this one? The code is attached.

I would be greatful for an answer,Thanks for your help.

Best regards,

Björn

Nonlinear_Benigno_MU.mod (7.54 KB)