Hi all,

I am really stuck with my coding in dynare and my dissertation supervisor has no clue how to help either. Attached I have my dynare code (disso3.mod) which won’t converge to a steady state, and also I have attached the equations which need to be coded (disso 3 equations pdf). They all match up and are easy to follow, so it shouldn’t take an experienced eye to check whether I have made a mistake.

I really appreciate any help,

MSCstudent

Nottingham

disso3.mod (3.17 KB)

disso 3 equations.pdf (1.66 MB)

Set up your model without the exp-substitution (the latter is too error prone when not computing the steady state analytically). You can then change this later once you have the steady state. Then provide sensible initial values. Assuming all (log) variables does not make sense. For example, you know that

in steady state and C<I<Y and I=delta*K

Thank you for your advice. I have now put everything in the same form as its written on paper (i.e. removed all exp-substitution). I have followed your examples in your page on ‘A guide to specifying observation equations for the estimation of DSGE models’ and remove the initial values all equal to zero. Instead I have created a steady state model section. Here I am stuck. I was only taught how to use the exp-subsitution method. What do I fill in to this section and/or how do I work out how many steady state equations I need?

Thank you so much again,

MSCstudent

Nottingham

disso4.mod (2.71 KB)

With a steady_state_model-block, you need to provide a full analytical steady state, which you don’t have. My suggestion was to keep using initval, but to use more realistic values., rather than 0 for everything.