Dear,

I need the help to find some error.

The error is that initial vaule is not incompatible with equations.

I am trying to figure it out. But still do not get it.

Thank you.

optimal.mod (1.43 KB)

Dear,

I need the help to find some error.

The error is that initial vaule is not incompatible with equations.

I am trying to figure it out. But still do not get it.

Thank you.

optimal.mod (1.43 KB)

The error message results from division by 0. As you did not specify an initval-block, all variables are initialized to 0.

Moreover, you FOCs are most probably wrong. Consider for example the term in the second model equation:

In the non-stochastic steady state, PSI and v are both 0. Hence, in the steady state computation,

results in a division of 0 by 0. This gives you the error message for equation 2.