Dynare forums

Hello everyone,

I've been trying to use dynare to solve the attached symmetric 2-country model with various frictions. The initial values should be right - I used the steady-state values which should be correct (residuals are minimal), but I still keep getting the following error message:

"??? Error using ==> lnsrch1 at 53
Some element of Newton direction isn't finite. Jacobian maybe singular or
there is a problem with initial values
Error in ==> solve1 at 126
[x,f,fvec,check]=lnsrch1(xold,fold,g,p,stpmax,func,j1,j2,varargin{:});
Error in ==> dynare_solve at 110
[x,info]=solve1(func,x,j1(r(i):r(i+1)-1),j2(r(i):r(i+1)-1),jacobian_flag,varargin{:});
Error in ==> steady_ at 69
[oo_.steady_state,check] = dynare_solve([M_.fname '_static'],...
Error in ==> steady at 52
steady_;..."

I would greatly appreciate, if someone could point out what might be wrong and what the error message mean.

Thank you very much in advance!

Your model contains nonstationary variables. So there is no unique steadystate, so it is impossible to compute it numerically. Furthermore the initial values that you supply don't satisfy the equations. See the output of resid(1). The numbers should be smaller than 10^-8 or about.

My advice is to start with removing the nonstationary variables from your model.

Best

Michel

Thank you very much for your help!