Hello,

I am trying to solve a simplified version of the Guerrieri, Iacoviello and Minetti model (2012). With respect to the main model I eliminated the government side and I added a certain degree of illiquidity in the bond market.

When I bring the model to dynare I get the following error message

STEADY: numerical initial values incompatible with the following equations

10

??? Error using ==> dynare_solve at 94

exiting …

Error in ==> steady_ at 120

[oo_.steady_state,check] = dynare_solve([M_.fname ‘_static’],…

Error in ==> steady at 54

steady_;

Error in ==> banking20120919 at 130

steady;

Error in ==> dynare at 120

evalin(‘base’,fname) ;

I computed the steady state using pen and paper several times, but I cannot find the error.

When I include the “resid;” option I get that the 1, 3 and the 10 equation in my model have big residuals. The problem is that I do not see how this is possible as it seems to me straightforward that for equations 1 and 3 at least the residual should be zero.

Is there any way I can fix it or is the model ill constructed?

Many thanks in advance for your help

Enrico

banking20120919.mod (1.58 KB)