Initial values - steady state guess

Dynare help (legacy posts)
1

Dear all

I am new to Dynare and have written a model on my own. Unfortunately I now get the error message

‘Impossible to find the steady state. Either the model doesn’t have a steady state, there
are an infinity of steady states, or the guess values are too far from the solution’

1.) What I have read so far, this is due to bad initial values, which is not surprising, because this is actually the main problem, as I do not know how to get the steady state values, not even approximations, so my initial values at the moment are completely random. I would appreciate any explanation (for beginners) how to get steady state approximations.

2.) Do I actually need to give initial values for all edogenous or exogenous variables or only for the lagged ones? I found different opinions on this.

3.) My model is an extension to the one in Ngalawa (for the paper see dynare.org/DynareConference2009/QEMEs.pdf) whose .mod-file that is available here dynare.org/DynareConference2009/ifs.mod
It would be very helpful if someone could tell me how he got the steady state values? There is no explanation in his paper. Is it possible to manually calculate the steady state and if so, how? Or do you need a Matlab-File - how would this look like?

4.) If anyone would be willing to have a look at my model itself, or does need to see it to answer my question, I would be happy to provide the .mod-file.

I am absolutely stuck at the moment, and really need the advice of some experienced people. I understand the problem, but have no clue how to solve it.
Thank you and best wishes
Antonia

2

First of all, for complicated models you should always try to compute the steady state manually. At economics.sas.upenn.edu/~jesusfv/benchmark_DSGE.pdf you can see a very general example. Basically, it means dropping all time indices and solving a system of nonlinear equations.

  1. If you don’t compute the SS manually, try providing plausible starting values. For example output is bigger than consumption which is bigger than investment. Capital is often investment divided by the depreciation rate. None of those variables can be zero or negative (Important: always provided positive starting values for variables that can only take positive non-zero values)
  2. Try to provide starting values for all endogenous variables. For any variable where you do not specify a starting value, Dynare takes 0 as the starting value.