I am trying to replicate the results of melina and villa - “Fiscal policy and lending relationships” and this is the error that i get in dynare
[code]SOLVE: maxit has been reached
Error using print_info (line 74)
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
Error in stoch_simul (line 98)
print_info(info, options_.noprint, options_);
Error in mymodel4 (line 443)
info = stoch_simul(var_list_);
Error in dynare (line 180)
evalin(‘base’,fname) ;[/code]
I know what the error means. Is there anything that can be done to avoid that? the steady state values were calculated exactly as given in their paper’s appendix. Any help on this will highly appreciated.
melina.mod (5.12 KB)
melina,villa.pdf (140 KB)