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)

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.

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

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

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