# Problem with NK model in Handbook of Monetary Economics

Dear professor,

I’m trying to find a steady state for Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. “DSGE Models for Monetary Policy Analysis,” Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7,
pages 285-367. However I get the following message:

Residuals of the static equations:

Equation number 1 : 0 : FOC consumption
Equation number 2 : -0.15132 : FOC labor hours
Equation number 3 : 0 : Euler equation
Equation number 4 : 0 : FOC of H and I
Equation number 5 : 0 : marginal cost
Equation number 6 : 0 : X1
Equation number 7 : 0 : X2
Equation number 8 : 0 : ptilt
Equation number 9 : 0 : 9
Equation number 10 : 0 : pstar
Equation number 11 : 0 : y
Equation number 12 : 0 : 12
Equation number 13 : 0 : 13
Equation number 14 : 0.0006569 : Taylor Rule

Error using print_info (line 32)

After checking every equation in model and steady_state_model, I still haven’t solve this problem. I hope to get the guidance on how to find the method.

nk_baseline.mod (4.3 KB)

You need to fix your steady state values. You have steady state inflation, which needs to be reflected in e.g. `R`, `Pi` and other places.

1 Like

Thanks for your reply! I’m not sure if I understand exactly what you mean. I have set steady state inflation PI = 1 in steady_state_model, that is:

R = 1/betta;
PI = 1;
z = 1;
ptilt = 1;
s = 1/lambdaf;
pstar = 1;
w = ((1/(1-gamma))^(1-gamma)(1/gamma)^gamma(1-psi+psiR)lambdaf)^(-1/gamma);
X1 = (1/(1-betta
xi))
(1/(1-((1-gamma)w/gamma)^(gamma)));
X2 = (1/(1-betta
xi))*(1/(1-((1-gamma)w/gamma)^(gamma)));
h = ((gamma/(1-gamma))
(((1-gamma)*w/gamma)^(gamma)/(1-((1-gamma)*w/gamma)^(gamma))))^(1/1+phi);
ivst = (1-gamma)wh/gamma;
y = ivst/((1-gamma)w/gamma)^(gamma);
c = y
(1-((1-gamma)*w/gamma)^(gamma));
lambda = 1/c;
end;

You mean is there may be a wrong equation in steady_state_model, or I need to add some steady state values related code in other part?

``````PIbar = 1.01;