Hi all,

I have a somewhat adjusted model of Gerali et al. (2010) which runs using stoch_simul.

However, when trying to compute the Ramsey optimal policy in this model, I encounter some problems.

From earlier posts and examples I understand that I cannot use the steady; command before using ramsey_policy.

However, when using the initial values of Gerali and attempting to get the optimal policy, I get the following error (using Ramsey_Gerali.mod):

Warning: Matrix is close to singular or badly scaled. Results may be inaccurate. RCOND =

6.114642e-33.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In lnsrch1 at 95

In solve1 at 107

In dynare_solve at 150

In dyn_ramsey_static at 66

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali at 1308

In dynare at 180

Warning: Matrix is singular to working precision.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In lnsrch1 at 95

In solve1 at 107

In dynare_solve at 150

In dyn_ramsey_static at 66

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali at 1308

In dynare at 180

Warning: Matrix is close to singular or badly scaled. Results may be inaccurate. RCOND =

9.176551e-38.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In lnsrch1 at 95

In solve1 at 107

In dynare_solve at 150

In dyn_ramsey_static at 66

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali at 1308

In dynare at 180

Reference to non-existent field ‘ghx’.

Error in evaluate_planner_objective (line 46)

Gy = dr.ghx(nstatic+(1:nspred),:);

Error in ramsey_policy (line 40)

oo_.planner_objective_value = evaluate_planner_objective(M_,options_,oo_);

Error in Ramsey_Gerali (line 1308)

ramsey_policy(var_list_);

Error in dynare (line 180)

evalin(‘base’,fname) ;

Could anyone explain what is happenning and how I can solve this problem?

Further, when I use the steady state values that are given as output as initial values, when I run stoch_simul of this model (using Ramsey_Gerali1), I get:

Warning: Rank deficient, rank = 0, tol = NaN.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In dynare_solve at 64

In dyn_ramsey_static at 66

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali1 at 1299

In dynare at 180

STEADY: numerical initial values or parameters incompatible with the following equations

Columns 1 through 15

```
1 2 4 5 6 7 10 11 12 13 16 17 18 19 20
```

Columns 16 through 23

```
28 29 30 31 32 39 46 67
```

Please check for example

i) if all parameters occurring in these equations are defined

ii) that no division by an endogenous variable initialized to 0 occurs

Warning: Rank deficient, rank = 0, tol = NaN.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In dyn_ramsey_static at 67

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali1 at 1299

In dynare at 180

Reference to non-existent field ‘ys’.

Error in ramsey_policy (line 27)

oo_.steady_state = oo_.dr.ys;

Error in Ramsey_Gerali1 (line 1299)

ramsey_policy(var_list_);

Error in dynare (line 180)

evalin(‘base’,fname) ;

Lastly, I tried to compute the steady state by hand to provide initial values for the steady (using Ramsey_Gerali_SS2), I get the following error message;

Warning: Matrix is singular, close to singular or badly scaled. Results may be inaccurate.

RCOND = NaN.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In dynare_solve at 64

In dyn_ramsey_static at 66

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali_SS2 at 1328

In dynare at 180

STEADY: numerical initial values or parameters incompatible with the following equations

2 7 11 32 33 34

Please check for example

i) if all parameters occurring in these equations are defined

ii) that no division by an endogenous variable initialized to 0 occurs

Warning: Matrix is singular to working precision.

In dyn_ramsey_static>dyn_ramsey_static_1 at 152

In dyn_ramsey_static>@(x)dyn_ramsey_static_1(x,M,options_,oo) at 40

In dyn_ramsey_static at 67

In evaluate_steady_state at 55

In resol at 104

In stoch_simul at 88

In ramsey_policy at 25

In Ramsey_Gerali_SS2 at 1328

In dynare at 180

Reference to non-existent field ‘ys’.

Error in ramsey_policy (line 27)

oo_.steady_state = oo_.dr.ys;

Error in Ramsey_Gerali_SS2 (line 1328)

ramsey_policy(var_list_);

Error in dynare (line 180)

evalin(‘base’,fname) ;

My questions are as follow:

what approach is the best to use? providing numerical initial values or an analytical solution?

what do the errors mean and how can I solve these?

I am really looking forward to getting some help, thanks a lot in advance!!

Nick

Ramsey_Gerali1.mod (19.9 KB)

Ramsey_Gerali_SS2.mod (20.5 KB)

Ramsey_Gerali.mod (21 KB)