I am currently building a DSGE model, which I set up sequentially since Dynare did not find the steady state for the medium-sized one with all frictions. Right now, it contains:
- Calvo style price and wage rigidities
- Habit persistence
- quadratic adjustment costs for investment relative to past investment faced by a capital Producer, who purchases the depreciated capital from the entrepreneur at t at price Q_t, augments it by investment and sells it as K(+1) to the entrepreneur at Q_t.
- the entrepreneur is fully debt financed, which he raises at rate (1 + i) from the household; purchases the capital (K(+1)) at the end of t at price Q_t, rents it out at (1+rk) to the intermediate producer, and depreciates it afterwards at p_delta before he sells it to the capital producer again.
The Problem of not finding the Steady state reoccured after I added capital. I initially built the model only with labor in the production function, choice of the household etc. I am quite sure
that the initial values are correct. However, it does not find the steady state. What else can I do? Do I have a timing issue, which I have not spotted despite checking several times?
Here is the file:
NKBase5.mod (8.2 KB)
It would be great if someone could cross-check my work.