Search and matching model using Dynare

[jpfeifer]

It’s actually more complicated. There are conditions under which you can handle a unit root with drift, despite not existing. See

Nocheck command?

Hi, The nocheck option is generally used in models where you have random walks with drift, ie equations of the form: a_t = \alpha+ a_{t-1}+\varepsilon_t There is no steady state for a, except if \alpha=0 in which case there is an infinity of deterministic steady states. In this situation (where the steady state does not exist) you can provide an arbitrary value for a in the block defining the steadystate or in a steady state file routine. This is safe as long as the elasticities and the rati…

Having a unit root itself without drift is usually not a problem. In this case, there are infinitely many steady states. The issue is there is no unique steady state so that you cannot use numerical techniques to search for it. Therefore, you have to provide the exact values of the one steady state you want to use to Dynare.