Dear all,

I am very new to Dynare and have been struggling with having Dynare computing the steady state of my model in order for it to run basic IRF simulations.

The model itself is extremely simple but I have a feeling I might be confusing Dynare in my code.

My first issue is that I would like bonds B to be equal to 0 in the steady state which causes an issue when also including log(B) in the var list, model and steady_state_model block. My understanding is that you specify a log(.) version of all the variables that need to be log-linearized?

In my model, I only have one variable expressed in a non-linear equation (eq. 8), which shows the dynamic path for P. I assume Dynare log-linearizes this equation which is why I have also entered log(P) in the var list, model and steady_state_model block, along with three of my other variables of interest, B, C_H and C_F, which are functions of P.

I am attaching my

simplemodel.mod (2.5 KB)

-file here. How can I modify my code to overcome the B=0 in the steady state issue? Could there also be something wrong with my eq 8? My eq 8 is just eq 1 plugged into eq 4. When using the resid command, I get:

Residuals of the static equations:

Equation number 1: Market clearing condition : 0.000000

Equation number 2: Price ratio and marginal utility optimality : 0.000000

Equation number 3: Country budget constraint : 0.000000

Equation number 4: Euler equation Home goods : 0.000000

Equation number 5: Euler equation Foreign goods : 0.000000

Equation number 6: Optimal level of B : 0.000000

Equation number 7: Optimal level of Foreign goods : -0.000000

Equation number 8: Dynamic path of price P : -0.103924

Equation number 9: log_P : 0.000000

Equation number 10: log_P_C : 0.000000

Equation number 11: log_P_F : 0.000000

Equation number 12: log_C_F : 0.000000

Equation number 13: log_C_H : 0.000000

Equation number 14: log_B : Inf

Equation number 15: log_Y : 0.000000

Equation number 16: log_Y_C : 0.000000

Equation number 17: log_R : 0.000000

Equation number 18: Exog. Shock process in log form : 0.000000

Any help or suggestions would be immensely appreciated. Thank you!