Dear Prof. Jpfeifer,

I am trying to numerically calculate the expected values of welfare for different policy specifications and compare those to one another. So I use a second order approximation to all the equilibrium conditions, including the recursive representation of welfare, which is just thhousing1.mod (6.6 KB)

e utility of the households as in the literature.

My code runs well, however, when I set “order=2”, I encounter the following message:

stoch_simul:: The simulations conducted for generating IRFs to epsa_c were explosive.

stoch_simul:: No IRFs will be displayed. Either reduce the shock size,

stoch_simul:: use pruning, or set the approximation order to 1.

What does it mean? If it is a problem, how can I fix it?

Besides, I also want to search over a grid over the parameter ranges, like [0,1], and set the grid step for each parameter, for example, 0.1, in order to find the optimal policy coefficients. How can I do this in Dynare?

Code attached.

Thank you for your help. Looking forward to your reply.