Dynare chooses wrong steady-state

Dynare help (legacy posts)
1

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)

2

If your model has several steady states, then the only way of forcing Dynare to choose the one you want is to change the “initval” block so that Dynare falls into the right steady state.

Best,

3

A more natural (and safe if one day you try to estimate this model) approach is to use a steadystate file where the zero inflation steady state is defined. Note that the steadystate file can be generated by the using a steady_state block in the mod file.

Best,
Stéphane.