RBC with labour market frictions

Steady state
1

Dear Prof. Johannes,

I am trying to simulate a RBC model with search and matching frictions à la Fonseca and Munoz (2003). For the past 4 weeks, I have recalculated the steady state with pen and pencil yet I still struggle to solve the model. I think I am quite close to solving the problem as there is only 1 equation in each file whose residual is -0.00008.
In dgematching file, I have fixed the steady state of output (y_star=1) while in match1, I have endogenously found the steady state of output (y_star). In the former, the technology function residual is -0 while in the latter the euler equation residual is -0.

I look forward to receiving your help

Best Regards

dgematching.mod (2.3 KB)
match1.mod (2.4 KB)

2

Hi, I don’t see why you should be able to fix both output and labor in steady state if you do not adjust parameters accordingly to make these values the steady state.

3

Hi Prof!

You are right.
I have fixed a scale parameter in technology such that y=1 in steady state. this works perfectly. I am currently having only the job creation equation whose residual is not equal to exactly 0 (0.0008). What would you suggest in this case?

4

You need to check your computations. There must be something wrong.

5

Thanks.

I will discuss further when we meet in Ispra for the training.

Regards