Steady state is different from what I tell dynare to be

Stochastic simulations
1

Hi,

I am a new user to dynare. I have a stochastic simulation which gives me a different steady state from what I specify in the code. I use stoch_simul.
I have double checked equations, nothing seems wrong.

“There are 7 eigenvalue(s) larger than 1 in modulus for 7 forward-looking variable(s). The rank condition is verified.”

I’ve tried model_diagnostics(M_,options_,oo_) too.
The message I get is:
MODEL_DIAGNOSTICS: No obvious problems with this mod-file were detected.

I really don’t know how to find out what is going on. I do appreciate it if you could help me with that.

Thanks

2

Hi,

How did you specify the steady state in the mod file? Did you use the steady_state_model block?

Best,
Stéphane.

3

Hi Stephane,

Thanks for your response.
Not really. I have SS values as parameters and after parameters block and before model block I have the equations related to SS. I had no idea that I need to have a steady_state_model block.
It’s a great hint. I’ll try it to see if it works. Is there a point in this block that might be useful for me to know? Are my SS values going to stay in parameters block?

Thanks,
Marieh

4

Dear Marieh,

If my understanding is correct, you are not really providing the steady state to Dynare. In this situation, Dynare uses a nonlinear solver to compute the steady state, and the solution returned by the nonlinear solver is different from what you did expect (you may have the steady state wrong). You will obtain informations about the steady_state_model block in section 4.10.2 of the reference manual. In this block you should associate your SS values to the corresponding endogenous variables.

Best,
Stéphane.

5

Is your model a linearized one? In that case you often need to distinguish between the steady states of the linearized variables and the steady states of the original nonlinear ones which are often used as parameters.

6

Hi Stephane,

Yes, you’re right. I’m not providing SS to dynare.
Thanks for the clarification. I’ll check the manual, and I’ll give it a try.

Best,
Marieh

7

Hi,

Thanks for your response.
No, it’s not linearized for now. But, I have another file that is linearized, and doesn’t work at all. For that, will you please explain a bit more about how I can use different SS values?
What I understand is for the nonlinear one, I need the SS block, but for the linearized one, I need to have one set of SS variables in SS block and one set of them in parameters block. Am I right? If yes, it’s a bit confusing to me. I have no nonlinear equation anymore, so why do I need SS values for them?

Best,
Marieh

8

See

9

Thank you very much Johannes.
Marieh