Hey everyone,
I am currently trying to replicate the paper “A model of unconventional monetary policy” by Mark Gertler and Peter Karadi and I have problems regarding the implementation of the ZLB. I could replicate all of their results in a stochastic setting and now I am trying to implement the ZLB using the deterministic simulation. In a deterministic setting I can only do a capital quality shock upto 7% without running into troubles with convergence due to the high degree of non-linearity in the model. Unfortunately (given the parametrization) this only allows for a binding ZLB of 4 quarters. I want to evaluate the effectiveness of credit policy with a more binding ZLB which is why I to be able to implement a larger shock. Thus i wanted to try the “linear_approximation” approximation option provided by dynare for the deterministic simulation. Although I computed the steady state, the following error message arrises:
Error using sim1_linear (line 120)
Jacobian is not evaluated at the steady state!
Error in perfect_foresight_solver_core (line 91)
sim1_linear(oo_.endo_simul, oo_.exo_simul, oo_.steady_state, oo_.exo_steady_state, M_, options_);
Error in perfect_foresight_solver (line 61)
oo_ = perfect_foresight_solver_core(M_,options_,oo_);
Error in GK_own (line 495)
perfect_foresight_solver;
Error in dynare (line 223)
evalin(‘base’,fname) ;
I tryd to implement the steady state without an external matlab file using the initval block and still got the error message. Has anyone got an idea on how to fix this?
Best,
Ben
