Dynare forums

Hello,
I'm trying to solve a very simple RBC model using an external steadystate.m file but it's unable to find the steady state. The problem seems to be one of the first order conditions, apparently the one w.r.t labor (the second equation). I have revised it extensively but I cannot see the problem. I'd appreciate some help. Thank you.

Hi, an obvious problem in your steady state file is that a should be equal to zero (not one). If you do that you will see that there is a non zero residual in the second equation (foc relative to the labour supply). You cannot calibrate the long run level of labour, as you do in the steady state file where you set h equal to .33, without using another parameter as an instrument. Usually this is done with a scale parameter in the additive labour disutility. I suppose this is related to the parameter thta in the second equation. You need to find the value of this parameter compatible with a steady state labour equal to .33. This has to be done in the steady state file.

Best,
Stéphane.