Homotopy for large deterministic shocks


I am running a model with large deterministic shocks and relying on the homotopy method in Dynare. Most of the time the method arrives at a solution, but in a few cases the method does not find a solution, even though lambda is very close to 1 (greater than 0.99). From what I understand this means that the solution shown is only marginally far from the “true” solution. Am I correct?

Thank you for your time and your extraordinary work to make modelers’ lives easier.

Yes, that should mean that you are very close to the solution to the true problem. The tricky part is understanding why the last part does not work, e.g. a solution may not exist.

Thank you for your response, Johannes. I can live with a shock which is an epsilon lower and for which a solution exists.