Replicating Smets-Wouters(2003)

General DSGE Modeling Replication Attempts
1

Hello

I am trying the replicate Smets-Wouters(2003) paper.
I was first trying to solve the model for calibrated parameters before undertaking estimation. But I have already errors(below). Thank you in advance for anyone who will help me. Cyril

Using 64-bit preprocessor
Starting Dynare (version 4.5.6).
Starting preprocessing of the model file …
Substitution of exo leads: added 1 auxiliary variables and equations.
Found 32 equation(s).
Evaluating expressions…done
Computing static model derivatives:

  • order 1
    Computing dynamic model derivatives:
  • order 1
  • order 2
    Processing outputs …
    done
    Preprocessing completed.

Warning: Matrix is singular to working precision.

In evaluate_steady_state at 263
In resol at 104
In stoch_simul at 89
In EuroCalib at 409
In dynare at 235
Error using print_info (line 90)
The steady state contains NaN or Inf
Error in stoch_simul (line 100)
print_info(info, options_.noprint, options_);
Error in EuroCalib (line 409)
info = stoch_simul(var_list_);
Error in dynare (line 235)
evalin(‘base’,fname) ;

EuroCalib.mod (5.6 KB)

1 Like
2

You have equations like

c_f = (1/(1+hab))*(hab*c_f(-1)+c_f(+1))-((1-hab)/((1+hab)*sig_c))*(r-pie(+1))+ (1-hab)/((1+hab)*sig_c);

At the end you have a constant term

(1-hab)/((1+hab)*sig_c)

Given this term, your steady states cannot be 0. My guess is that you need to drop all constants.

3

Thank you Professor Pfeifer.
I am trying your suggestion.

Cyr