I am currently working on my model but it fails to calculate the steady state although I cannot see the mistake I probably made. Has anyone any guidance on how to find the steady state?
Thank you in advance and please find my code below!
var
C // Consumption
R // Return on Capital
W // Wage rate
A // TFP
Y // Output
//P // Price
//M // Money
L // Labor
K // Capital
I // Investment
//Pi // Inflation
//Rn // Nominal interest rate
//R_star // Natural interest rate
;
predetermined_variables K;
parameters
ALPHA
BETA
DELTA
KSI
ZETA
RHO_A
//RHO_R
//PHI_PI
//PHI_Y
//y_ss //steady state output
//pi_ss // steady state interest rate
SIGMA_A //0.01; // Standard deviation of technology shock
;
varexo
ETA_A
//ETA_R
;
ALPHA = 1/3;
BETA = 0.96;
DELTA = 0.025;
KSI = 0.7;
ZETA = 1.5;
RHO_A = 0.95;
RHO_R = 0.95;
PHI_PI = 1.5; // Taylor rule: response to inflation
PHI_Y = 0.5; // Taylor rule: response to output
y_ss = 1;
pi_ss = 0.02;
SIGMA_A = 0.01;
model;
1/C = BETA * 1/C(+1) * R(+1);
W = C*KSI / (1-L);
K = (1-DELTA)*K(-1) + I;
Y = C + I;
Y = A*K^(ALPHA) * L^(1-ALPHA);
W = (1-ALPHA)*A*K^ALPHA *L^(-ALPHA);
R = ALPHA*A*K^(ALPHA-1) * L^(1-ALPHA);
//M / P = ZETA*C;
log(A) = RHO_A*log(A(-1)) + ETA_A;
// 10. Taylor rule
// Taylor rule
//Rn = R_star + Pi + PHI_PI*(Pi - pi_ss) + PHI_Y*(Y - y_ss) + ETA_R;
end;
steady_state_model;
A = 1;
R = 1/BETA;
L = 1/(1 + KSI * (1-ALPHA)/((1-ALPHA) - DELTA*ALPHA*BETA/(1-ALPHA)));
K_L_ratio = (ALPHA*BETA)^(1/(1-ALPHA));
K = K_L_ratio * L;
Y = A * K^ALPHA * L^(1-ALPHA);
I = DELTA * K;
C = Y - I;
W = (1-ALPHA) * A * K^ALPHA * L^(-ALPHA);
end;
// Initial values (optional but helps with convergence)
initval;
A = 1;
R = 1/BETA;
L = 0.33;
K = 10;
Y = 1;
I = DELTA*K;
C = Y - I;
W = C*KSI/(1-L);
end;
steady(solve_algo =1);
check;
shocks;
var ETA_A = SIGMA_A^2;
end;
stoch_simul(irf = 40);