Hi again,

Now that the code is properly working, I cannot seem to converge to a steady state. I tried using homotopy methods, but I obtain an error (below). Your suggestions have been very helpful last time, so I really appreciate anything that jumps out at you as being possibly wrong. The mod file is also attached.

HOMOTOPY mode 1: computing step 0/50…

??? Error using ==> lnsrch1 at 53

Some element of Newton direction isn’t finite. Jacobian

maybe singular or there is a problem with initial values

Error in ==> solve1 at 127

[x,f,fvec,check]=lnsrch1(xold,fold,g,p,stpmax,func,j1,j2,varargin{:});

Error in ==> dynare_solve at 128

[x,info]=solve1(func,x,j1(r(i):r(i+1)-1),j2(r(i):r(i+1)-1),jacobian_flag,

bad_cond_flag, varargin{:});

Error in ==> evaluate_steady_state at 66

[ys,check] = dynare_solve([M.fname

‘_static’],…

Error in ==> steady_ at 54

[steady_state,params,info] =

evaluate_steady_state(oo_.steady_state,M_,options_,oo_,~options_.steadystate.nocheck);

Error in ==> homotopy1 at 88

[steady_state,M.params,info] = steady_(M,options,oo);

Error in ==> steady at 49

[M_,oo_,info,ip,ix,ixd] =

homotopy1(options_.homotopy_values,options_.homotopy_steps,M_,options_,oo_);

Error in ==> planner_toy at 152

steady;

Error in ==> dynare at 120

evalin(‘base’,fname) ;

planner_toy.mod (2.14 KB)