Hi everyone,

I am currently trying to replicate the baseline version of the 2-bank model in the Handbook of Macroeconomics chapter “Wholesale Banking and Bank Runs in Macroeconomic Modelling of Financial Crises” By Gertler/Kiyotaki/Prestipino (2016).

I wanted to keep the coded model as simple as possible (as I am still a Dynare beginner) and attached the respective *.mod file for review. To start with, I took the same parameters as the authors and the stated steady state values as initial guesses for my steady state calculations. However, the steady state cannot be found/computed.

I tried a lot of different things to get the steady state, and in the version attached I assume the problem to lie in some of the equations I included in the code, in particular the ones labeled as “Equ. (17, 19-21) combined (see Appendix)” might be wrongly included. However, I am not sure how to improve the code,i.e. which equations from the paper could alternatively be used or what other errors could cause the problem.

Has anyone tried to replicate the baseline model (no-bank run model) and can help me out with the problem?

Thanks a lot in advance!

Baseline_Model_test2.mod (5.9 KB)