Steady state convegence for deterministic RBC!

At the moment I am running a deterministic version of an RBC model with intangible capital.

I calculated the steady state values for all the variables by hand and then formed different MATLAB functions for those variables.

Unfortunately, my model doesn’t converge. (it says spurious convergence)


steadyk.m (150 Bytes)
steadyi.m (293 Bytes)
steadyc.m (99 Bytes)
steady.m (244 Bytes)
intangible1_switch.mod (916 Bytes)

The remaining functions:
steadyy.m (145 Bytes)
Steadypsi.m (182 Bytes)

Your file should simply be

[code]var ki k i y c psi;

parameters beta h delta deltai theta phi q;

beta = 0.979;
h = 0.3;
delta = 0.039;
deltai = 0.039;
theta = 0.212;
phi = 0.150;
q = 1;

(1/c) = beta*(1/c(+1))(1 - delta + theta(k^(theta-1)(ki^phi)(h(+1)^(1-theta-phi))));
(1/c)q = beta(1/c(+1))(1 - deltai + phi(k^theta)(ki^(phi-1))(h(+1)^(1-theta-phi)));
psic/(1-h) = ((1-theta-phi)(k(-1)^theta)(ki(-1)^phi))/(h^(theta+phi));
c = y-i;
i = k+ki
y = (k(-1)^theta)


ki = ((deltai + (1/beta) - 1)/((phi*((delta + (1/beta)- 1)/theta)^(theta/(theta-1))(h^(1-theta-phi)))))^(1/(theta+phi-1));
k = ((delta + (1/beta)- 1)/(theta
i = (delta
(((delta + (1/beta)- 1)/(theta*(ki^phi)(h^(1-theta-phi))))^(1/(theta-1))))+(deltai((delta + (1/beta)- 1)/(theta*(ki^phi)(h^(1-theta-phi))))^(1/(theta-1)));
y = (k^theta)
c = y - i;
psi = (c

As you can see, your computed values do not match the model equations. So either your steady state computation or the equations are still wrong. focus on the equations with a large residual

Thank you so much.

I checked my equations and there were a few errors. Now, I have managed to get all the residuals down to zero except for the second equation. I checked my model equation and there seems to be nothing wrong with it. So I changed one of my parameter values (deltai) for convergence to steady state.

When I run the command steady, there seems to be an error: “Not enough input arguments”.

I don’t know how to resolve this!


dynare intangible1_switch

Configuring Dynare …
[mex] Generalized QZ.
[mex] Sylvester equation solution.
[mex] Kronecker products.
[mex] Sparse kronecker products.
[mex] Local state space iteration (second order).
[mex] Bytecode evaluation.
[mex] k-order perturbation solver.
[mex] k-order solution simulation.
[mex] Quasi Monte-Carlo sequence (Sobol).
[mex] Markov Switching SBVAR.

Starting Dynare (version 4.4.3).
Starting preprocessing of the model file …
Found 6 equation(s).
Evaluating expressions…done
Computing static model derivatives:

  • order 1
    Computing dynamic model derivatives:
  • order 1
  • order 2
    Processing outputs …done
    Preprocessing completed.
    Starting MATLAB/Octave computing.

Residuals of the static equations:

Equation number 1 : 0
Equation number 2 : 3.0713e-05
Equation number 3 : 0
Equation number 4 : 0
Equation number 5 : 0
Equation number 6 : 0

Modulus Real Imaginary

    3.33e-16         3.33e-16                0
      0.9506           0.9506                0
       1.075            1.075                0

There are 1 eigenvalue(s) larger than 1 in modulus
for 1 forward-looking variable(s)

The rank condition is verified.

Error using steady (line 4)
Not enough input arguments.

Error in intangible1_switch (line 132)

Error in dynare (line 180)
evalin(‘base’,fname) ;


intangible1_switch.mod (1015 Bytes)

That’s because you still have your old file called steady.m in the same folder. Delete it please.

It worked. Thank you so much!