I can't get steady state in 5 period OLG model with pensions



I am trying to get the IRF for a 5 period 0LG model in which agents work for the first 3 periods, receiving a wage and then retire for 2 when they get their pensions. I am having trouble finding the steady state in dynare as it tells me it cant find it. Since I’ve programmed the model in matlab I already know the s.s. values which are my initial guesses. More specifically, for a replacement rate of 0.3 for the pensions (pensions = 0.3*wage), which is what I want to model, it can’t find a steady state. In case I set the replacement rate to 0, the code gets the correct steady state for some reason I can’t understand. I have uploaded the mod file in case anyone has any suggestions.

Thanks a lot!OLG1_5per_pens.mod (2.8 KB)



If you think that your steady state computation is correct, then your model equations must be wrong. Have you checked the residuals given your steady state values?


Dear Dr Pfeifer,

Yes I did that and got high errors for the first 3 (out of the 4) Euler equations. However I do not understand the reason.

Thank you for your fast reply!





I got


k2   		 0.00623128
k3   		 0.0125614
k4   		 0.00734087
k5   		 0.0197249
c1   		 0.0167009
c2   		 0.0312031
c3   		 0.0575869
c4   		 0.0736106
c5   		 0.134739
C    		 0.062768
K    		 0.00917182
w    		 0.229312
r    		 2.42326
pens 		 0.0687932
tao  		 0.666661


yes, sorry my bad!

Thank you a lot fo the fast reply!