Problem with code and/or SS, DSGE with incomplete financial markets and heterogeneous agents


I am new to Dynare and trying to replicate the model of Prasad and Zhang, 2015 “Distributional effects of monetary policy in emerging markets” for my master’s thesis. I could not find the SS analytically (Appendix 1) without making some assumptions (productivity, A_H and A_N=1, S (terms of trade) = 1 and all relative prices = 1 at the SS) but the code is still not working. I do not know if the code is wrong or if it comes from my assumptions. Are there other ways to solve for the SS?

Thanks for the help.

Prasad and Zhang, 2015.pdf (497.2 KB)
OpenPrasadZhang.mod (2.6 KB)


  1. Focus on the equations with residuals. If
log(R_star/(1+psi_b*b_star)) = rho_R_star*log(R_star(-1)/(1+psi_b*b_star))+eps_R_star;

then the steady state for R_star is
and not
R_star = (1+psi_b*b_star)/betaa;
2. Yes, you typically need to make such assumptions.

Thanks! I did focus on those equations but still did not know how to solve them, I think my problems come from the foreign bond.

  1. Actually, it should be R_star_bar and I put the one I found analytically (and made a mistake forgetting betaa) not knowing how to call for the SS result. Is it possible to ask dynare to use a value he will find? Did not find anything like that (Not sure my question is really clear).

OpenPrasadZhang.mod (2.6 KB)

Upload of new version, there was a mistake on the initval

There is the STEADY_STATE()-operator. See the manual.

Yes, I did, it seems to work now. I was also trying to solve R_star, which is actually exogenous, and I used 1/betaa as initial value, in case someone wonders.

Thanks a lot!

Hello, Nastasia, I’m was trying to replicate the code for peruvian economy in a university course. I had the same problems and still can’t run the code correctly. Today I find this forus so I was wondering if you could help me. Thank in advance.