I’m a new Dynare user trying to graph the transition path to steady state for consumption and capital for the model below.
var c, k, y; parameters alpha, beta, delta, TFP; alpha = 0.36; beta = 0.99; delta = 0.025; TFP = 1; model; c(+1) = beta*c*(TFP*alpha*k^(alpha-1) + (1-delta)); k = TFP*k(-1)^alpha - c + (1-delta)*k(-1); y = TFP*k(-1)^alpha; end; initval; c = 1; k = 1; end; endval; c = 1; k = 1; end; steady; simul(periods = 500);
As you can see, it a simple Solow model. When I plot consumption after running it, I expect to see a smooth concave function. Instead, I find that my consumption first drops below 1.00 and then slowly goes up to steady state (see attached graph) - which should not be happening. Any pointers as to how I can make sure this does not happen? I do get the right steady state results though.