Dynare forums

Hi,

I am trying to solve Fernandez-Villaverdes' model without the capital, investment and wage rigidity. It's a simple model with price rigidity only.

I am aware that we need to re-scale some variables in order to preserve stationary time series. However, I still encounter certain problems when Dynare is trying to deal with the technology variable (A), which is the only exogenous shock that grows exponentially.

An infinite element was encountered when trying to solve equation(s) 6 with respect to the variable(s): A.

Could anyone give me some thoughts or hints on where I get it wrong? Thanks in advance.

Hsuan

A problem is

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A(+1) = A*exp(mu_a + e_a);


In steady state, it implies

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1=exp(mu_a)

which is only feasible if mu_a=0.