Hi. I’m trying to replicate a basic model with price rigidities a-la Calvo. Attached is the .mod file. When I run this one, the error that Dynare shows me is this:

??? 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 124

[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 ==> steady_ at 120

[oo_.steady_state,check] = dynare_solve([M_.fname ‘_static’],…

Error in ==> steady at 54

steady_;

Error in ==> parametros at 162

steady;

Error in ==> dynare at 132

evalin(‘base’,fname) ;

Error in ==> Dynare1 at 11

dynare Parametros.mod

What could be the problem?

Thanks for your attention

Parametros.mod (1.45 KB)