A general question:

can dynare deal with models, which have no steady state?

Many greetings,

Daniel

A general question:

can dynare deal with models, which have no steady state?

Many greetings,

Daniel

What do you mean with no steady state? For stochastic simulations, Dynare linearizes around the non-stochastic steady state (which may be non-unique). If it does not exist, it won’t work.

I mean, I have a model with a government and a central bank. The government optimizes a utility function but with a different discont rate then the household, thus I get a equilibrium condition that in the steady state demands that both discont rates have to be the same, which they can’t due to the assumption of a myopic government. Thus I wondered that the system has no steady state. Perhaps I am wrong, since I also think, that it could be that this system has no steady state since the government accumulates to much debt due to myopia.

Do you understand what I mean? I hope…