I’m having some troubles computing the SS for the replication of Iacoviello 2005.
Some of the static eq. residuals are different from 0, but I’m not getting it.
Any clue? Can you help me?
Thank you in advance.
Iacoviello_2005_replication.mod (5.2 KB)
recheck the ss OF eqs of non-zero residuals
I could find multiple sources for your problems. One is that some of your steady states are complex, for instance Lp. I don’t think this is desired from your side.
Second, you have to declare steady state values for all endogenous variables in your steady state model. You do not have a steady state for X, this makes the residual of equation 7 be Inf.
I would suggest you recheck your steady state model such that it includes all endogenous variables and can recursively be solved.