Hello, I’m a graduate student working with DSGE models and dynare for the first time, and I’m having a bit of trouble getting my model to run.
It’s a standard RBC model which incorporates a government which raises distortionary taxes for Labor.
I tried hundred times to run my code but error message was alway same : Impossible to find the steady state (the sum of squared residuals of the static equations is 181.5748).
Can Anyone suggest me how to fix it?
my code is here,
%%%%%%%%%%% Before Running the Dynare %%%%%%%%%%%
%addpath('/Applications/Dynare/6.3-arm64/matlab')
%dynare
%%%%%%%%%%% Declaring Endogenous Variables %%%%%%%%%%%
% RBC Model with Dynare
var
y % Output
k % Capital
c % Consumption
n % Labor
w % wages
r % real interest rate
G % government spending
T % Labor market taxation rate
i % investment
;
%%%%%%%%%%% Declaring Exogenous Variable %%%%%%%%%%%
varexo
e_T % Labor market taxation Shock
;
%%%%%%%%%%% Declaring Parameters and Calibrating Parameter Values %%%%%%%%%%%
parameters
beta % Time discout factor
delta % Depreciation rate
theta % Capital share
gamma % Frisch elasticity of labor supply
rho_g % TFP Shock Persistency
sigma_e % Standard Deviation of tau Shock
B % Preference factor
omega % coeffcient in gss
;
beta = 0.99;
delta = 0.025;
theta = 0.33;
gamma = 1;
rho_g = 0.9;
sigma_e = 0.01;
omega =0.2;
B=4;
rss = (1/beta)-1;
wss = (1-theta)*((((1/beta)-1)+delta)/theta)^(theta/(theta-1));
kss = ((rss+delta)/theta)^(theta*(1-theta)/(theta-1)) * (wss/(1-theta))^(theta-1);
nss = (((rss+delta)/theta)*kss)^(1/(1-theta));
yss = kss^theta * nss^(1-theta);
gss = omega*yss;
css = wss*nss+rss*kss-omega*yss;
Tss = gss / (wss*nss);
%%%%%%%%%%% Specifying Model Economy %%%%%%%%%%%
model;
%%%Production function%%%
exp(y) = exp(k(-1))^theta * exp(n)^(1-theta);
%%%Resource constraint%%%
exp(c) + exp(k) = (1-exp(T))*exp(w)*exp(n)+(1+exp(r))*exp(k(-1));
%%%%Intertemporal Euler equation%%%%%
exp(c)^(-1) = beta * exp(c(+1))^(-1) * (1+exp(r(+1)));
%%%%Intertemporal Euler equation%%%%%
B*exp(n)^(1/gamma)=exp(w)*(1-exp(T))/exp(c);
%%%%% MPK %%%%
exp(r)+delta = theta * exp(k(-1))^(theta-1) *exp(n)^(1-theta);
%%% MPL %%%%%
exp(w)=(1-theta)* exp(k(-1))^theta * exp(n)^(-theta);
%%% investment %%%%%
exp(i) = exp(k) - (1-delta)*exp(k(-1));
%%%% Gov %%%%
exp(G)=exp(T)*exp(w)*exp(n);
%%%TFP process%%%%%
T = rho_g * T(-1)+ (1-rho_g)*steady_state(T) + e_T;
end;
initval;
n = nss;
k = kss;
c = css;
y = yss;
r = rss;
w = wss;
G = gss;
T = Tss;
end;
steady;
check;
shocks;
var e_T = sigma_e^2;
end;
stoch_simul(order=1, irf=20, irf_shocks = (e_T));