Hi,

I am new to Dynare and I am struggling to set up a permanent shock to simulate a steady state transition in my model. Basically I need to simulate the transition from no carbon tax (tau_e = 0) to with carbon tax (tau_e = 0.017).

I have used initval and endval followed related posts here. But I got the error message “Impossible to find the steady state”.

This is how I set up the permanent tax shock:

initval;

…

end;

endval;

e_tau_e = 0.017;

end;

steady;

shocks;

var e_tau_e;

periods 0:5 5:500;

values 0 0.017;

end;

I am also attaching my Dyane file.

Does anyone have an idea what’s going on here?

steadystate.mat (667 Bytes)

solve_v7.mod (7.5 KB)

Best and thanks for any help!

Check your model. For the `initval`

-steady state, there are `-Inf`

as steady state values. That cannot be.

Professor Pfeifer, thanks for your prompt reply! The SS values for those variables are 0. I simply put everything into exp() so they became -INF…I’ve modified my mod file and remove exp() for those with ss=0. I still got the error message saying “Impossible to find ss” after the permanent shock. Could you please help me take a look again?

solve_v8.mod (7.4 KB)

Are you sure a steady state exists for `tau_e`

not equal 0?

I am trying to replicate this paper [https://www.nber.org/system/files/working_papers/w28525/w28525.pdf]. They talked about the permanent shock (an increase in tau_e from 0 to 0.017) on page 22, and on page 39 and 50, they have tables showing different steady states. Am I misunderstanding something?

The problem is that the `trust_region`

-algorithm fails. Use

solve_v8.mod (7.5 KB)