Help Regarding BETA value

I am running a DGE model in Dynare. Though I have been able to finalise the model set up, however, while calibrating the parameters of the model, I am unable to feed the BETA value as less than 0.9. It would be very helpful if anyone can guide me in this regard.
A higher BETA value implies higher impatience on part of the consumers, which is not a requirement in my framework. Hence, I want to try and see what happens to my results if I vary BETA between 0.1 and 0.6. Kindly advise.

Hi,

a bit more information about your model would be helpful and also what the issue is when you use low values. Is it the steady state or something else? Have you thought about whether this makes sense also in combination of your steady state interest rate? Just my first thought. Also, I have never heard/read about a value this low, does this make economic sense w.r.t. intuition about consumption e.t.c.?

Thank you very much for replying to my query. Our model is Deterministic Infinite - Horizon Ramsey Model.

ramseymodel.mod (470 Bytes)
ramseymodelsim.log (4.7 KB)
ramseymodelsim.mod (512 Bytes)
ramseymodel.log (4.1 KB)

I am attaching the dynare files here for your kind perusal - The error arises when I work on determining the steady state and perform simulation. I want to assess the role of BETA in influencing individuals’ trade off between present and future consumption, hence, I want to try with different BETA values. Thank you for pointing out the plausible issue that could arise due to the initial interest rate value. I shall surely think along those lines. Kindly look at my attached dynare files once and share your suggestions.

Thank you.

Hi Nibha,

you have a timing error for your variable k. Dynare uses the end of period convention. Thus, you have to change k(+1) to k and all k to k(-1) then the ramseymodelsim.mod runs through. Have you tried a stochastic version of your model to first see whether it makes sense with ‘normal’ parametrization?

Thank you so much for replying to my query. I incorporated your suggestion and accordingly changed the variable k, and ran the model again. However, I am still getting some error notifications (attaching the error and dynare file). Would it be possible for you to share a basic template (dynare files) of your file with me? I just want to check if I am correctly running the process. Kindly guide.

ramseymodelsim.log (18.9 KB)
ramseymodelsim.mod (519 Bytes)

The timing is still incorrect in the production function and the labor FOC is missing brackets. Moreover, you did not provide a valid endval. How about the attached file?
ramseymodelsim.mod (654 Bytes)

Thankyou Sir for responding. I wanted to know what is the unit of measurement you define for the initial and end value. Because for our study we are considering Indian dataset and are skeptical on which unit of measurement to take.

If you can also suggest any literature where the authors have mentioned the unit of measurement for the initial and end value. That would be really helpful.

We usually use unitless percentage deviations from steady state, with the steady state units being meaningless. See e.g.

Thankyou Sir.

Dear Sir/Ma’am,

I tried solving a very simple GE framework with 2 sectors as shown in the attached file, however, I have two queries. I will be really grateful if the forum can help me in rectifying my queries. I am trying my best to solve them.

a. I am trying to differentiate between two sectors by putting a technology parameter “T” in one of the two sectors. However, the model is not running (despite the system being internally consistent) and I am getting the following error - attached as a file. model.log (18.7 KB)

b. I have been trying to put initial values based on actual data from an Indian dataset. However, the system is not allowing me to do that as well. I am attaching the file for your kind perusal. Please help me in rectifying the errors. It would be very helpful if someone can also suggest a guide on how to learn the basics of Dynare (apart from the guide available on the software) so that I am able to get answers to my simple queries on my own.
model.mod (1.1 KB)

You again did not have a well-defined terminal condition and also did not use a sufficient number of periods to reach the terminal condition.
model1.mod (1.2 KB)

Thankyou Sir. After running I am receiving this error. Kindly help!

dynare model1.mod
Starting Dynare (version 5.1).
Calling Dynare with arguments: none
Starting preprocessing of the model file …
ERROR: model1.mod: line 22, col 1: syntax error, unexpected INT_NUMBER

error: Dynare: preprocessing failed
error: called from
dynare at line 269 column 5

Please provide the most recent version.

I ran the same code which you attached.
model1.mod (1.2 KB)

The file runs on my machine without any problems.