Schmitt-Grohe and Uribe JIE, 2003, Model 1 - Endogenous discount factor

Steady state
1

Hello to all,
I tried to replicate the model using the script provided by Mr. Pfeifer available at (https://github.com/JohannesPfeifer).
I used calibration parameters for Italy case:
gamma = 2.21;
omega = 2;
psi_1 = 0;
alpha = 0.32;
phi = 0.53 ;
r_bar = 0.04;
delta = 0.033264732;
rho = 0.1883;
sigma_tfp = 0.006335167;
psi_2 = 0.000742;
d_bar = 0.7442;
psi_3 = 0.00074;
psi_4 = 0;

I got this message:

Error using print_info (line 88)
The steady state is complex
Error in stoch_simul (line 100)
print_info(info, options_.noprint, options_);
Error in itmod1 (line 197)
info = stoch_simul(var_list_);
Error in dynare (line 223)
evalin(‘base’,fname) ;

As far as I understand, there is no a steady state???
What is suggested to do in this case?

Thank you in advance.

2

Please provide the full file.

3

Thank you for the reply Mr. Pfeifer.
Waiting for suggestions.
Kind regards.

itmod1.mod (6.9 KB)

4

Your model features a negative eta and lambda. Removing the exp()-solves this problem, but the model does not make sense in this case. You need to find out why this is the case.
itmod1.mod (6.8 KB)

5

Ok.
I’ll work on better calibration of the model then.
Thank you for the reply.
Best.
Fjona.