Problem with finding Steady State when I replace a variable with its Steady State

Steady state
1

Hi all,

I’ve come across an interesting issue when attempting to transition from a model with an interest rate dependent on the MPK to a fixed interest rate. Namely, I thought that an easy way to transition would be to take the working .MOD file and substitute:

R_N = alpha_N*z*A*(kn^(alpha_N-1))*(hn^(1-alpha_N));

with

R_N = R_ss;

where R_ss is the computed steady state for R_N in the working .mod file. However, when I make this replacement Dynare is no longer able to find the steady state of the model, which is strange, since it should be exactly the same as before (I’m feeding in the steady state of the working .mod file into the initval block).

Has anyone had this issue before? Is this due to how Dynare solves for the Steady state?

I’ve attached my .mod file (full_model_new2.mod (5.8 KB)

The switch is made in line 162/163. Any help is much appreciated!

Jake

2

I am getting

Error: r2 not used in the model block
3

Sorry Johannes, I was testing something and inadvertently uploaded the wrong file.

This one should work:
full_model_new2.mod (5.8 KB)

4

When you start working with analytical values, you must not start rounding arbitrarily.
You have

r_ss = (1/beta)-1;
R_ss = r_ss + delta;

which is correct. But then you overwrite it by

r_ss =  		 0.010101;
R_ss = 		 0.033101;

which is not correct.

5

That fixed the issue, thank you!