Hello everyone,

Is it necessary to have residuals of the static equations to be zero in order to solve DSGE models in dynare?

If some equations are not zero, is it an indication to work on those equations in order to get zero residuals?

Thanks.

Hello everyone,

Is it necessary to have residuals of the static equations to be zero in order to solve DSGE models in dynare?

If some equations are not zero, is it an indication to work on those equations in order to get zero residuals?

Thanks.

Are you referring to a log-linearized or non-linear model? In both cases they should be zero. If you, however, log-linearized the model-equations they are per definition zero as they give you deviations from steady state, which in steady state are zero. When the equations are not log-linearized, the goal is also to make them zero or as close to zero as possible. As you can find in many posts here, there are different methods in entering a non-linear steady-state model in Dynare .

Willi Mutschler made and excellent video tutorial on how this is done best: https://www.youtube.com/watch?v=Ei_z0HSfYNo

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