Dynare unable to find steady state

[stepan-a]

Hi,

This is not a simple question so you really do not need to apologize. I do not really understand what you are trying to achieve with the two matlab routines, since I have the impression that you try to do exactly the same as the Dynare steady command (solve the system of non linear static equation for the endogenous variables). Dynare optionally proposes to use different non linear solvers to perform this tasks (see the reference manual). You should try to use these alternatives (again with different initial conditions).

Also did you try to obtain a closed form solution for the steady state? Your model does not seem that complex… In the worst case where no closed form solution are available, it is always able to reduce the dimension of the non linear system as described here:

How to solve steady state in large scale DSGE models

Even if you are not able (or if it is not possible) to get a closed form solution for the steady state, you can help Dynare. A first approach, as you mention it, is to provide a sensible initial guess for the Newton solver (through the initval block). But this is in general far from obvious, especially when it comes to estimation (since the fixed initial condition of the solver might be very far from the solution, depending on the current values of the deep parameters). Another approach is to c…

which will help the non linear solver (and also probably help you to find a more sensible initial guess).

Best,
Stéphane.