 # Impossible to find steady state (simple model with household, firm and gov-issuing bond)

Hello all,
I have a model with households, firm, and a government.

The household chooses how much to work, how much to buy bonds, and how much to consume.

The firm chooses how much to invest and how much labor to employ.

The government issues bonds to cover last periods bond payment and transfer to household.

There are 3 equations for household;
Bond demand equation.
Labor supply equation.
The HH Budget Constraint.

There are 2 equations for firm;
Capital equation.
Labor demand equation.

There is only one equation for government.

Here are the equations in Dynare;
Assume that 1 is the transfer received by the HH and 1 is the transfer spent by the government.

c + b/r = w*h + b(-1)+1;

(1/c)(1/r) = beta(1/c(+1));

(1.72/(1-h)) = w/c;

1 = beta * (theta *k(+1)^(theta-1)*h(+1)^(1-theta) + (1-delta));

w = (1 - theta)*k(-1)^theta * h^(-theta);

b/r = b(-1)+1;

I have been working on this on paper, so I figure the problem is the Dynare convention.

I always got an error of “Impossible to find steady state.”

erp.mod (465 Bytes)

Use

``````initval;
c = 0.364389;
h = 0.472946;
w = 0.691369;
k = 0.58607;
r = 1/beta;
b = r/(1-r);
end;
``````