STEADY: convergence problems with Iacoviello (AER 2005)


I am having trouble replicating a version of Matteo Iacoviello’s 2005 AER paper “House prices, borrowing constraints and monetary policy”.

I have attempted several versions of the model, and simplified it to the file attached. The steady state is straightforward to calculate analytically.

However, when running it into dynare I get always errors of the type:

SOLVE: maxit has been reached
??? Error using ==> steady_
STEADY: convergence problems

Error in ==> steady at 54

Error in ==> iac_basic at 133

Error in ==> dynare at 132
evalin(‘base’,fname) ;

Any help would be greatly appreciated, as I have no clue whatsoever as to what can be causing these problems.

iac_basic.mod (1.08 KB)

I went through two lines and I already have two questions. first, why is your initial value of R 1.0101010? Should’t it be equal to the log of that given the rest of your code? Second, why in the second line do you have exp(c+1)?

The way I sometimes check these is to take my model block, remove all the time subscripts (i.e. (+1) and (-1)), and just check whether the equations are satisfied at the initial values. Your first two equations aren’t. I didn’t check any more. Check for typos before you post.