I’ve been working on an international RBC model with two countries for the last few days and I am trying out Dynare for the first time. So far, so good: Dynare solves the model in about five seconds and I get a bunch of pretty impulse-response figures. Results appear to make sense. One thing worries me though. Countries can lend to each other in the model so there are infinitely many steady states, one for each level of debt. A shock to the model moves my economy towards a different steady state. I have checked that this new steady state is an equilibrium. But I read this passage in Dynare’s user guide:
That is, should they return to the SAME steady state where the process begins, or is it OK if they move to a different steady state? Can I trust the results I am getting?
Thanks in advance for your input.