Hello, I am having an issue with the steady state of my model - Dynare reports that the ‘steadystate file did not compute the steady state’. The code runs if I use steady(nocheck), but I would like to understand why it won’t work otherwise given that I computed steady state by hand. Thank you in …

Thank you. I corrected this - now there is the residual only in the wage equation, but I do not find any mistake there. Also, the steady(nocheck) does not run now reporting indeterminacy due to Blanchard & Kahn conditions not being satisfied. noLFPnoSImodel.m (2.9 KB) noLFPnoSImodel.mod (4.5 KB) …

You need to find out why there is still a non-zero residual. Check your timing. I think b should be predetermined, for example.

Thank you very much, Prof. Pfeifer! I fixed both points, so the code runs now for the 1 sector model. noLFPnoSImodel.m (3.0 KB) noLFPnoSImodel.mod (4.5 KB) However, when I extend the setup to 2 sectors, I still have an issue, and I cannot figure out why the code won’t run (it reports residuals in…

You need to check why your computed steady state values are inconsistent with the three equations. Particularly, try to understand why the Euler equation does not hold.

Could there be something wrong with the function in the matlab file? I realized that if I change initial values for w_H, w_L and beta, there are no longer residuals in the three equations. However, Dynare reports that the rank condition is not verified (also, some of the estimated steady state value…

It’s hard to tell, but the steady state for one of the wages is negative. That makes no sense and suggests there is still a problem with your codes.

Hello, I rewrote the model so that the two sectors are completely symmetric and the code still does not run (all the equations are basically identical to the 1sector version in noLFPnoSImodel.mod which works). I do not see any reason why it should not run - would you perhaps have any other suggesti…

Your model features explosiveness. Quite often that is a timing issue. Sometimes it’s a problem with the economic mechanisms stabilizing state variables like debt or capital.

Thank you very much, Prof. Pfeifer. There could be a timing issue with debt variable, but I do not see what is wrong. It is strange that the code runs in 1-sector case and does not work with 2 completely identical sectors. Do you perhaps have any suggestions what to do, as I tried everything I could…

Two sector models can introduce special issues like Timing of capital in two sector model

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Steady State Question

Steady state

jpfeifer 18 June 2024 15:26 20

That sounds strange. See

Timing of Capital and BK Condition General DSGE Modeling

There is one unique timing. If the correct initial timing results in a violation of the Blanchard Kahn conditions, then there must be a mistake somewhere else. You cannot fix it by simply altering the correct timing of the law of motion for capital. That will correct the number of unstable eigenvalues, but will result in wrong model dynamics.

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