Issue with ramsey planner

Optimal Policy
1

Good morning everyone,

I am currently trying to simulate a Ramsey planner problem of my model. I want the planner to have control over two fiscal instruments at the same time, but the model does not work, as Dynare returns me this error:

Ramsey: The solution to the static first order conditions for optimal policy could not be found. 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

I had a previous version of the model, with lump-sum taxes and the planner having control over only one instrument. In this case, the model worked well.
What I changed, in shynthesis:

  1. Distortionary taxation (so now there is a gov budget constraint)
  2. The planner now controls 2 instrument.

After this modifications, the model no longer works… Can you help me detecting the problem, please?

Thank you very much, have a nice day!

tempp.mod (5.2 KB)

2

One steady state exists for

initval;
v=-0.000192128;
t=0.000186846;
end;
3

Dear Professor, thank you for your answer. I tried with the initial values you suggested, and now Dynare returns me the following error:

Blanchard & Kahn conditions are not satisfied: no stable equilibrium.

I tried also the model diagnostics, and this is what I get:

evaluate_steady_state: The initial values for the steady state of the following variables are NaN:
AUX_EXO_LEAD_822

Am I doing something wrong?

Thank you very much for the help, have a nice day!

4

This suggests that there may be multiple steady states with different properties. Maybe try different starting values.

5

Dear Professor, thank you very much for the answer!