How to find appropriate initial values

Steady state
1

Hello everyone,

I have built a Iacoviello-type housing market DSGE model.

When trying to run the code, Dynare cannot find a solution to the steady state. I suspect it is because I have assigned bad initial values, or am I wrong? Is there a way to calculate (or solve for) appropriate values?

Any help is highly aprreciated. I have attached my code below.

DSGE.mod (3.5 KB)

2

Hi, you need to specify the steady-state around which the model has to be linearized. Either by giving close enough initial guesses in initval or by computing the steady-state analytically and then feedind initval or steady_state with it.

You can find the appendix of Iacovello (2005) on his web-site where the steady-state is cumputed analytically https://www.matteoiacoviello.com/research_files/AER_TA_2005.pdf.

3

Hi, thank you very much!

I will give it a try.
Appreciate the help, thanks.