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)

Also find attached my steadystate.m file

extmodel_steadystate.m (3.6 KB)

The issue is not that no steady state is found, but rather that the `steady_state.m`

-file you provide does not return the correct analytical steady state matching the entered model equations.

Thank you for your reply jpfeifer! How do you see that the steady_state.m file doesn’t fit the model (except that no steady state could by found?)

I adapted the .m file from the reproduction file set from the original paper. But I noticed that the equations in the .mod file for reproduction of the model differ from the equations given in the paper / technical appendix.

Do you have an idea why that’s the case?

Thank you for your help

Thank You jpeifer.

For example: In the published version of the paper in the setting of the extended model equations B.26 and B.27 contain the expression (1-rho_e)* m_n* A_me* lambda_e.

In the technical appendix which is in the folder “reproduction files” on Iacoviellos website, the same equations are listed without (1-rho_e) and in addition the .mod file for reproduction doesn’t contain the shock A_me. In my understanding that’s important for the propagation of the shock troughout the model… Besides that the weights in the production-function (1-mu) and mu are written the other way round.