Problems about fixed cost in intermediate production firm and steady state


#1

Hello everyone,
I am workong on a paper about cooperation about macroprudential policy and monetary policy , I have a problem about fixed cost in intermediate production firm in computing steady state. The reason I draw into fixed cost for getting zero profit in intermediate production firm.Here are the equations ahout process how I sovle steady states in optimal equations , I hope I can get wheather the process is right or wrong, thanks a lot!1.pdf (131.8 KB)


#2

What exactly is your question? Fixed costs do not affect first order conditions (except for the constraint itself)


#3

Thank you for your reply , professor.
I draw into fixed cost in production function to keep intermediate production firm zero profit in long term. But I need calibrate the fixed cost as a parameter, so I wonder if the calibration process is right , and I need get the steady state of the model, so I attached the process how i get fixed fixed cost parameter and the steady state of total output as Y(i), because I knew the capital rental rate rk and procuction capitak K ,so Y should be rk * K / alpha (output elasticity of capital )?


#4

Have a look at the NK_baseline.mod in the Dynare examples folder and its references.


#5

Thank you , professor, I have solved the problems here. But I have an another question, when I draw in to Incentive compatibility mechanism of commercial banks in gertler and karadi (2010) “a model of unconventional monerary plolicy” model, there will be a unit root problems in progressive capital equation of commercial banks, I wonder how to solve this problem, thank you, professro.


#6

Is the unit root a bug or a feature in this setup?


#7

Professor, I don;t know if it is a bug or a feature ,but when I fixed the transfer capital to bank in each period as a parameter , the code can run well, and the plots seem to be good. I don’t know if I need to modify the code,still?


#8

This is a question only you as the model builder can answer,