Dear researchers,

I would like to integrate in a model the possibility of having fixed costs of investment (which would be different from the adjustment costs of investment according to the literature). There would thus be two equations describing investment behaviour. The first one, when investment is not in its stationary state there would be fixed costs (a constant). The second, in the stationary state where investment is equal to the maintenance of the depreciated capital, the fixed cost no longer appears in the investment function. To try to model it I have tagged two different equations by [dynamic] and [static], but Dynare tells me that the static equation, does not correspond to the dynamic equation. Would anyone have a trick to model in Dynare the possibility of having two different equations?

I attached a pdf describing the model, and two .mod files. The first one (fi2.mod) is a classic model that runs properly (without fixed costs), the second one (fi3.mod) tries to take into account the possibility of fixed costs .

I wish you all a happy festive season.

Max.

fix3.mod (1023 Bytes)

fi2.mod (973 Bytes)

fixed_costs.pdf (96.9 KB)