Problem about the computation of the steady state

Steady state
1

Hi,

I am currently working on simulating the transition path from one steady state to another in my model. The policy shock occurs in the first period. I have a separate file (solvess_model.m attached) that I use to solve the steady state. When the policy shock is small, Dynare successfully computes the steady state. However, when the policy shock is larger, Dynare issues the following warning: “The steadystate file did not compute the steady state.”

I am unsure of the reason for this issue. I would greatly appreciate any insights or suggestions you might have to help resolve this problem.

Thank you very much in advance for your assistance.
main_tax1.mod (3.7 KB)
solvess_model.m (1.9 KB)
solve_ss.m (2.1 KB)

2

From what I can see, your steady state file fails due to the solver stopping early:

fsolve stopped because it exceeded the iteration limit,
options.MaxIterations = 1.500000e+03.
1 Like
3

Thank a lot for your response. I would like to understand why this issue is occurring. Is it possible that Dynare cannot find the steady state because the shock is too large?

4

This is not a Dynare problem, but a problem with your steady state computation. You need to investigate why your routine to compute fails to compute the steady state. It may indeed by that a steady state does not exist for such a large shock.