Hello all,

A couple of questions regarding whether Dynare imposes non-negativity constraints. I have a model with two sectors, and two laws of motion for investment. The investment resource constraint writes: I(total) = I(sector 1) + I(sector 2). Now, since I allow for full mobility of capital, then it could be possible that the optimal choice is to cut down investment in one sector, effectively transfer capital to the other. Does Dynare allow for this, or does it somehow impose non-negativity constraints?

In trying to find-out the above, a second question came to my mind. I simulated the model, which gives me values for each variable at each period. Now since I log-linearise the model, each of these variables is expressed in log-deviations from the steady-state. In order to check whether indeed some values are negative, I added to the value given by Dynare the steady-state value (I have that, I solve the steady-state by hand). For example to get the consumption in NON-deviation from steady-state, I do:

for i=1:length(oo_.endo_simul)

c1_NonDev(i) = oo_.endo_simul(8,i) + c1_ss ;

end

… where 8 is the position of consumption in the M_.endo_names and c1_ss is consumption at steady-state.

However, I often get negative values even for consumption!! Am I doing something wrong? Or is the way I am thinking about this wrong?

Thanks!

Kyri