Environmental DSGE

Dear all,

I am currently trying to replicate the environmental DSGE model of Carattini, Heutel & Melkadze and having some issues with the environmental damage function. When running the model, the residuals of the quations appear all fine a part from the ones including the emission and pollution level which is then connected to abatement and carbon pricing. The level of X seems to be smaller in the steady state compared to the value presented.
In their paper, the authors describe their way of scaling but neither setting the pollution level to 2030, nor rescaling of the damage function in a way similiar to it as described is working.

Did someone else encounter similar issues or has an idea what is falsely specified? It could potentially be a mistake in the parameterization of the steady state as well - for the equilibrium conditions I oriented myself at the ones disclosed by the authors.

Please find the paper and the current version of the code attached.

Thanks!

carratini_v3.log (15.6 KB)

Carratini-1.pdf (748.0 KB)

You only provided the log-file, not the mod-file.

Sorry my bad!

carratini_v3.mod (16.0 KB)

Put the resid before steady to see that the second equation shows a large residual given your computations. That’s usually the place to start looking.