I’m working on a simple 1-country model with banks and a macroprudential tax.
The model works fine when I set the tax at a single value and I solve the private agents equilibrium:
Found 19 equation(s). Evaluating expressions...done Computing static model derivatives: - order 1 Computing dynamic model derivatives: - order 1 Processing outputs ... done Preprocessing completed. Residuals of the static equations: Equation number 1 : 0 Equation number 2 : 0 Equation number 3 : 0 Equation number 4 : 0 Equation number 5 : 0 Equation number 6 : 0 Equation number 7 : 0 Equation number 8 : 0 Equation number 9 : 0 Equation number 10 : 0 Equation number 11 : 0 Equation number 12 : 0 Equation number 13 : 0 Equation number 14 : 0 Equation number 15 : 0 Equation number 16 : 0 Equation number 17 : 0 Equation number 18 : 0 Equation number 19 : 0 STEADY-STATE RESULTS: Cc 1.97251 Hc 0.864802 Rc 1.0101 Yc 2.49057 Ac 0 xic 0 Kc 20.7226 Ic 0.518065 rc 0.040022 Wc 1.92092 Qc 1 Rkc 1.01502 Nc 3.93638 Dc 16.7862 Lambdac 0.99 jc 2.00047 gammac 0.0250058 tauc 0 Tc 0 . . . There are 4 eigenvalue(s) larger than 1 in modulus for 4 forward-looking variable(s) The rank condition is verified. MODEL SUMMARY Number of variables: 19 Number of stochastic shocks: 2 Number of state variables: 8 Number of jumpers: 4 Number of static variables: 8
But when I try to compute the optimal policy by just adding:
// Objective function and discount factor planner_objective (Cc)^(1-sigmma)/(1-sigmma) - (Hc)^(1+pssi)/(1+pssi) ; ramsey_model(instruments=(tauc), planner_discount=betta); options_.ramsey.maxit = 5000;
Of course, that implies that I am removing the tax equation from the model block:
//19: Taxes (set here an eq. if No Opt. Fiscal Policy) //tauc = 0.0;
Now, my problem is that the SPP cannot be computed, not even the steady state. I get this:
Residuals of the static equations: Equation number 1 : 2.7924e-05 Equation number 2 : 1.1e-05 Equation number 3 : 1.4733e-07 Equation number 4 : 7.6384e-05 Equation number 5 : 0 Equation number 6 : 0 Equation number 7 : 0.0013946 Equation number 8 : 4.8461e-05 Equation number 9 : -1.439e-06 Equation number 10 : 3.4481e-05 Equation number 11 : 0 Equation number 12 : 1.2334e-07 Equation number 13 : 0.00021397 Equation number 14 : 0.0011806 Equation number 15 : -1.4295e-07 Equation number 16 : 2.5886e-05 Equation number 17 : 1.9926e-07 Equation number 18 : -3.9036e-05 Equation number 19 : 3.2375e-05 Error using print_info (line 156) Ramsey: The maximum number of iterations has been reached. Try increasing maxit. Error in steady (line 104) print_info(info,options_.noprint, options_); Error in MaP_1CountryAE_Lv (line 367) steady; Error in dynare (line 235) evalin('base',fname) ;
Two things look odd to me. First, that the residuals of the equations don’t look as nice as before (they’re close to zero but not exactly as before). The other is that it’s asking me for more allowed iterations. (that’s the reason why I added the maxit=5000 line).
After I added the line I get the same, only about 30min later:
Error using print_info (line 156) Ramsey: The maximum number of iterations has been reached. Try increasing maxit. Error in steady (line 104) print_info(info,options_.noprint, options_); Error in MaP_1CountryAE_Lv (line 368) steady; Error in dynare (line 235) evalin('base',fname) ;
What can I do? I was dead sure that as long as I provided a private equilibrium working I could get a simple Ramsey (one instrument) to work.
Can somebody help me? Any input is greatly appreciated.