NK model with stochastic volatility and Epstein-Zin

Steady state
1

Hi all,

I am new Dynare. I am trying to code up a New Keynesian model with stochastic volatility and Epstein-Zin preferences according to Benigno, Benigno, and Nistico (NBER Macro Annual, 2011), which is similar to Caldara et al. (2012).

I have calculated and provided the steady state, but there persists a residual for the steady state of the equation specifying E_{t} (V_{t+1}). I wonder whether this is due to a mistake in timing or something else. Grateful for any ideas out there!NK_vol.mod (6.7 KB)

2

I think your Taylor rule should be

  (1+i)/(1+STEADY_STATE(i)) = ( (1+i(-1))/(1+STEADY_STATE(i)) )^pphi_i * (Pi/Pibar)^(1-pphi_i) * xi;
3

Thanks for the response! This is correct, though now it seems I have a timing issue.