I’m trying to estimate a NK model with both price and wage stickiness. I’ve solved for the analytical steady state by hand, and found steady-state values for all the (17) endogenous variables. However, when I estimate the model, it still throws up the dreaded “impossible to find…” error.
I ran the dynare file with the “resid” command, and it shows that the residuals using the initvals are all really small (all e-05 or smaller), which I interpret to mean that I’m feeding values close to the steady state. The estimated residuals are all very small (the largest is 0.002, the others are e-04 or smaller). And still, “steady” does not seem to be able to find a steady state. I tried increasing maxit to 1000, and still no luck.
Can someone guide me as to what I’m doing wrong? Many thanks!
Dynare_Procyclical_Markups.mod (4.2 KB)