Steady state and TFP shocks

Steady state
1

Dear professor,
I am a dynare beginner and try to study the TFP shocks and observe their impact on the economy’s variables over time.
However, my code isn’t running and is producing errors: Impossible to find the steady state (the sum of square residuals of the static equations is 93929262.4352). Either the model
doesn’t have a steady state, there are an infinity of steady states, or the guess values are too far from the solution.
I was wondering if someone could take a look at my code and advise on how to fix it.
In addition, I would appreciate guidance on how to determine and set the initial values. Thank you very much.
model_dis1.mod (2.7 KB)

2

The errors imply: the steady state value of varible is wrong, so there is residuals in equation.

You can caculate the value in steady state. For example,
in equation FOC2 beta * (c/c(+1))^sigma * (r(+1) + 1) = 1;
we can get the steady state value of r=1/beta-1.
Then you can calculate other variable steady state values.

1 Like
3

Thank you for your reply. I’ll try it.

4

Does your model even have a steady state? It seems there is no depreciation and capital can be accumulated without bounds.

5

Thank you very much. I figured out how to change it.