HELP - two sectors SOE

[elettra]

Dear all,
I am using DYNARE 4.04 version for solving a model based on Galì and Monacelli (2005) with a tradable (flex prices) and non tradable sector (sticky prices).
When I run the code (here attached) I got the following error messages:
??? Error using ==> steady_
STEADY: convergence problems
Error in ==> C:\DYNARE 4.0.4\matlab\steady.m
On line 52 ==> steady_;
Error in ==> C:\DYNARE 4.0.4\matlab\kouakou_short.m
On line 160 ==> steady;
Error in ==> C:\DYNARE 4.0.4\matlab\dynare.m
On line 102 ==> evalin('base',fname) ;

I do not get any steady state result. What could be the problem? I read all the FAQs, the guide and the manual, but I couldn't solve it alone.
Please help me, it is really important.
Thank you.

two_sectors_SOE.mod

(2.09 KiB) Downloaded 157 times

[SébastienVillemot]

Hi,

It looks like your model is misspecified. When all values are equal to zero, the residual of the equation 7 (defining rr) is not null: at steady state, rr = -rho_ppi. Maybe you meant rr = -rho_ppi * (...).

Best,