SS in deterministic model

Perfect foresight simulations
1

Dear all,

I am trying to simulate a deflationary experiment in dynare. Below is a brief outlook of the relevant part of the model

var pai
parameters paiss paiss1 ALFAPAI
varexo target

ALFAPAI=1.5;
paiss=(1.04)^(1/4); (for quartal values)
paiss1=(1.0)^(1/4);

model;
int/(intss)=(pai/target)^ALFAPAI;
…
end;

initval;
pai=paiss;
target=paiss;
…
end;
check;
steady;

endval;
pai=paiss1;
target=paiss1;
end;
check;
steady;

Now simulating the model everything works correctly, however I am not getting the expected value for the anual inflation {i.e. annpai=100*(pai.^4-1);}.
In the first period pai takes the value of 12.48%, despite the fact that I indicated 1.04, or 4%.

Honestly I just can’t understand why this happens, does anyone have an idea?

Thank you for the help
Best

2

Without the full file, it is impossible to tell.

4

Inflation is a jump variable. You cannot set its initial value. It will simply react to the economic situation immediately.