I am trying to estimate a DSGE model with monopolistic competition and price rigidity according to Rotemberg (1983). The model, in levels, takes Peter Ireland’s framework.
I have attached the mod.file
I’m getting the follow output “error”. What does it mean? There is no impulse response functions neither.
Can someone have a look and tell me where the problem might be?
Currently, for second order approximation, Dynare runs th simulation by recursion with the 2nd degree polynomials decision/transition functions. This can lead to explosive trajectories and the empirical moments are reported as NaN (Not A Number). The alternative is to look at the 2nd order accurate moments reported when no simulation is done.
An alternative approach would be to run the simulation with the “pruning” algorithm described in Kim, Kim, Schaumberger and Sims, but it isn’t implemented yet in Dynare. (The moments would be the same as the 2nd order accurate ones).