Hey there, I have a problem to find the steady state of “Financial business cycles” Iacoviello (2015). Before I estimate the shock-parameters, I want to stoch_simul the extended model. To make things “easier” I only take into account 2 shocks and set the others to 1 (they are multiplied) and their equations are in log. For the missing parameter-values that are needed I take the posterior mean of Iacoviellos estimation-results. I calculate the initial values from Iacoviello’s steadystate.m file and wrote my own .m file as an alternative.

Unfortunately no steady state can be found.

Is this approach correct?

I would appreciate every hint

Find attached my .mod file and Iacoviellos equations. Will upload my steadystate.m later if possible (I’m a new user and can only upload 2 files)

extmodel.mod (7.1 KB)

FBC_equations.pdf (132.3 KB)