If you are using stochastic simulations, Dynare needs to compute the steady state of the Ramsey problem, including the steady state of the instrument. As always with stochastic simulations, there are two ways to do this:
- Let Dynare compute the steady state numerically. In that case, you just put in an
initval-block with all variables you want to specify a starting value for. The problem is that the steady state is often hard to find, because the problem is typically highly nonlinear. - You provide an analytical steady state for the decentralized economy in e.g. a
steady_state_model-block. As you do not know the value of the instrument in steady state, that steady state must be conditional on the instrument. For every value of the instrument given to the file, you need to provide the steady state for all other variables. That way, Dynare only needs to find the value of the instrument in steady state and the Lagrange multipliers numerically. It turns out that this problem is linear and thus easy to solve. That is the reason we usually recommend doing it this way. Theinitval-block in this case serves only to provide the initial value for the instrument in steady state finding. You must use it when the standard value of 0 for the instrument is not feasible.
Regarding the mod-file, I cannot run it, because you are loading a mat-file you did not provide. But in any case, the discussion has been moved to