I am working on optimal fiscal problem with two tax instruments: consumption tax and capital income tax . with a RBC framework. I successfully run the stochastic version of the model setting the two tax rates as parameters and the steady state solution are quite consistent.
However, when i run the same code with ramsey_model, it can’t find the steady state. I got the error message as follows:
Using 64-bit preprocessor
Starting Dynare (version 4.6.1).
Calling Dynare with arguments: none
Starting preprocessing of the model file …
Ramsey Problem: added 11 Multipliers.
Found 11 equation(s).
Found 24 FOC equation(s) for Ramsey Problem.
Computing static model derivatives (order 1).
Computing dynamic model derivatives (order 2).
Computing static model derivatives (order 3).
Processing outputs …
Error using print_info (line 32)
Ramsey: The steady state file does not solve the static first order conditions conditional on the instruments.
Error in stoch_simul (line 103)
print_info(info, options_.noprint, options_);
Error in Benin_opt.driver (line 333)
[info, oo_, options_, M_] = stoch_simul(M_, options_, oo_, var_list_);
Error in dynare (line 293)
evalin(‘base’,[fname ‘.driver’]) ;
What could be the reason for that?