I’m trying to simulate a DNK model with ZLB around the steady state. When the natrual rate is positive and the ZLB is not binding in the steady state, there is no problem, but when I try to impose a negative natrual rate and the ZLB is binding in the steady state, Dynare cannot solve for the correct steady state and generate a steady state with negative nominal rate, and I’m wondering why this happens.

I don’t understand. The ZLB does not have a negative nominal rate. Just the notional rate would be negative. Moreover, OccBin only works if there is a return to the baseline regime. It will not work if the ZLB part has its own steady state.

Sorry maybe I haven’t stated the question clear enough. I’m trying to study the dynamics of a DNK with a ZLB when the natural rate is negative. Due to the negative natural rate, ZLB is binding in the steady state, and as you have said, the Occbin toolkit cannot handle this case right? Thank you!

I’ve solved this problem by setting the binding case as the baseline case, thank you very much! Great help!