Issues with steady state estimation

Stochastic simulations
21

Hi,

Thanks again, professor - I tried to solve the steady state values once again and obtained this results hence there are still issues with the steady states. It would be a great help if you had the time to provide me with some feedback on this as I’m stuck and cannot see where I do it wrong.

rbc_adam_new.mod (1.7 KB)

22

Again, why can’t you compute the steady state analytically. The model does not seem that complicated.

23

Thanks for taking your time. I started all over by rechecking the equations again and ended up with the following results where the timing error is the problem as

STEADY-STATE RESULTS:

Y 0.0858045
Yc 2.65455
Yi 0.332908
C 0.0807175
Inv 0.00508691
Hc 0.64
Hi 0.0170152
W 0.0807175
Rc 0.0287057
Ri 0.00371345
Qc 0.0152802
Qi 0.00197249
Kc 33.2908
Ki 0.999995
X 0.0139999
Z 0.999995

EIGENVALUES:
Modulus Real Imaginary

       0.986            0.986                0
       0.989            0.989                0
       1.004            1.004                0
       1.813           -1.813                0
       2.909            2.909                0
   1.146e+12        1.146e+12                0
         Inf             -Inf                0
         Inf              Inf                0

There are 6 eigenvalue(s) larger than 1 in modulus
for 4 forward-looking variable(s)

The rank condition ISN’T verified!

Error using print_info (line 32)
Blanchard & Kahn conditions are not satisfied: no stable equilibrium.

If you had the time i really appreciate if you could provide me with some feedback (any kind is better than nothing) of how I can move forward as the time is running faster and I have a deadline (hopefully) to reach in time.

Thanks again.
rbc_adam_new.mod (2.2 KB)

24
  1. Q_i is not predetermined.
  2. Your process for Z is explosive.

rbc_adam_new.mod (2.2 KB)

Given that it runs with a cgamma<1, I guess you need to properly detrend the model.

25

Thank you so much, professor for taking your time to help med - I really appreciate it.
Just some follow up-questions:

  1. What impact does it have for the results that Z is explosive?
  2. How do you suggest I could detrend the model?
  3. I obtain NaN value for Hc - is it because it is a constant parameter?

POLICY AND TRANSITION FUNCTIONS
Hc
Constant 0.640000
Kc(-1) 0
Ki(-1) 0
Z(-1) 0
eps_Z 0

Thanks in advance!

26
  1. If the exogenous process explodes, the model will not be stable.
  2. See e.g. https://www3.nd.edu/~esims1/rbc_extensions.pdf
  3. Yes, it’s because it is constant (you should not call it a parameter)
27

Thank you so much for your help!