Steady state and residual equations

Dynare help (legacy posts)
1

Dear all,

I am doing simple open economy model with tradable and nontradable goods. I got an error message showing “The steadystate file did not compute the steady state”, and I looked at the Residuals of the static equations which is showing like:

Residuals of the static equations:

Equation number 1 : 0.79691
Equation number 2 : 0.38594
Equation number 3 : 0
Equation number 4 : 0
Equation number 5 : 0.162
Equation number 6 : 0
Equation number 7 : 0
Equation number 8 : 0
Equation number 9 : 0.20024
Equation number 10 : -0.015023
Equation number 11 : 0
Equation number 12 : 0
Equation number 13 : 0
Equation number 14 : 0.001005
Equation number 15 : 0

I numerically calculated the steady states and input them by using steady_state_model; block. Does the error message appear because I got too big residuals in some equations and I got wrong steady states? If I log-linearize, will the problem be gone? Thank a lot!

J
model1.mod (1.23 KB)

2

Hi,
I think you calculated the steady-state wrongly. The residuals give you hints which equations are wrong, but to me it looks as if something is fundamentally wrong since you have non-zero residuals in many equations.
Log-linearising won’t help because when we solve the steady-state we do it for the non-linear model. Plus, you need a steady-state to log-linearise around it.

K.