Transition path in a deterministic model

[fuyangzhao]

Hi there,

I want to use the perfect foresight simulation to obtain the transition path from an initial state (say, 90% of steady state capital stock) to the steady state.

But when I looked at the simulated transitions, it turns out that all variables are fixed at the steady state, regardless of the initial values. There is no transition at all.

There is any clue how I can fix this problem?

I coded the mod file as in

https://github.com/JohannesPfeifer/DSGE_mod/blob/master/Solow_model/Solow_SS_transition.mod.

I solved the steady state in an external m file, so I omitted the endval block. In initval block, I provide initial values of predetermined variables. (I don’t need to provide initial values for all variables, right?)

Is my problem related to the failure of BK condition?

There are my model and steady state file
fymod.mod (4.0 KB) fymod_steadystate.m (5.0 KB) paramfile.m (429 Bytes)
Thanks!

Best,

FY

[jpfeifer]

My guess is that is has to do with various timing errors related to the states that are supposed to be predetermined. Please read

Timing of capital in two sector economy

Hello all, I am building a two-sectoral model, and I have a question about the timing of sectoral-capital variables: In my model, T and N are sectors, hence kT is capital in sector T and kN is capital in sector N. Then, I assume that the economy’s aggregate capital is simply: k = kT + kN. However, I assume only one law of motion for aggregate capital such that: k = (1-delta)*k(-1) + i - written in Dynare language. It is clear to me that k is a predetermined variable and should be treated as su…

[fuyangzhao]

Thanks Prof!
Two additional question:

1. In initval block, I don’t need to provide initial values for all variables, right?
2. Is there any chance that my problem is related to the failure of the BK condition?

[jpfeifer]

1. You need to provide initial values for all state variables.
2. As I said, you have timing errors related the state variables. Those are the reason your BK condition fails.

[fuyangzhao]

Thank you Professor ! I’ll examine the timing.