I downloaded this Dynare code from Oliver De Groot’s site quite a while ago. It solves a version of Financial Accelerator (FA) model of Bernanke, Gertler and Gilchrist (1999). When you go to the section where he initializes the variables, you see this:

initval;

Output = log(2.259875601998544);

Consumption = log(1.889751205447075);

Investment = log(0.370124396553604);

Hours = log(0.834038273844502);

Capital = log(14.417630004535932);

Net_Worth = log(7.219838991921110);

re = log(1.029898129317636);

r = log(1/beta);

uc = log((1-beta*hab)/((1-hab)*Consumption));

Q = log(1);

zbar = -1.883167413363652;

dzbar = log(5.891086325695023);

fw = log(0.970161158163312);

gw = log(0.035278587963346);

wbar = log(0.492074808956435);

g = log(6.888687199256979e-004);

f = log(0.490327750880418);

a_t = log(1);

a_k = log(1);

eps_t = 0;

Risk_Premium= log(re/r);

Leverage = log(2);

SSSpread = log(2);

defaultt = log(3);

new_recovery_rate = log(0.5);

end;

I think he solves for the steady state numerically, though when I downloaded this no steady state file came with it. This code runs as a stand-alone piece. My question is, when you solve for the steady state in a separate MATLAB file, how do these initial values enter the .mod file? I mean, does one have to solve it in MATLAB and then then copy paste these numbers in .mod file as initial values? I ask this because I am trying to solve a model with FA block but I am clueless how to provide initial values for the variables which enter the model from FA block such as the functions F and G and there derivatives. Here’s the original .mod file bgg_1.mod (6.3 KB).