Hi all,
I’m trying to replicate the results in the second chapter of the Ph.D. thesis titled, “Essays on the Macroeconomic Effects of Imperfect Banking Competition and Other Financial Frictions.” [1] I was successful in deriving and understanding the equations used to build the model. However, I find great difficulty in building it using the dynare program. In page 126, the author lists the equations used in the dynare program and mentions in page 26 that the nonlinear model is solved using a firstorder Taylor approximation around the steady state.
My questions are:

We have a total of 33 equations, as I’m interested in the role of imperfect banking competition in amplifying shocks to the economy I’ve left the equation (2.43) related to perfect banking competition out of the system of equations leaving me with a total of 32 equations. While the number of endogenous variables is 40 if we take the equations as they are specified by the author without any modification from my part. Dynare documentation states that the number of equations in the model block should be equal to the number of endogenous variables which is not the case in this DSGE model. I don’t know whether other equations were employed by the author in his program, or did she write some variables in terms of others thereby reducing their number or am I missing something?

In the case I don’t have a closed form solution for the steady state but I would like to assign one or more endogenous variables to specific values at the steady state (e.g.: labor = 1/3) then how should I go on about writing the code. At which dynare code block should I specify them and how should I approach the associated parameters? Should I calibrate the latter or not? I’m a little bit confused here since calibrating the parameters will result in them staying fixed throughout the optimization process.

Finally, if I have \lambda_t = 1/c_t or the real loan rate R_{rb,t}, real deposit rate R_{R,t} and real loan margin RLM_t = R_{rb,t}  R_{R,t} (see the banking sector block at page 126) should I specify them all in the model block and assign each an initial value at the initval block or would that create a redundancy in the code.
Below you will find the document and my rather poor attempt to replicate it.
[1]
Essays on the Macroeconomic Effects of Imperfect Banking Competition and Other Financial Frictions.pdf (2.1 MB)
Code:
jiaqili.mod (2.9 KB)