Dynare forums

I have been trying to work with the model from Garcia_Cicco et. al. (2010) - "Real Business Cycles in Emerging Countries?" -

and I have the following after I run the program:

??? Error using ==> steady_ at 132
STEADY: convergence problems

Error in ==> steady at 54
steady_;

Error in ==> model2 at 156
steady;

Error in ==> dynare at 120
evalin('base',fname) ;

Code: Select all

// Model Garcia-Cicco

%----------------------------------------------------------------
% 1. defining variables
%----------------------------------------------------------------

var y, c, h, k, d, r, a, g, x;

varexo ea, eg, rw;

parameters gamma, theta, beta, alpha, delta, rhoa, rhog, psi, phi, omega, dbar, gbar;

%----------------------------------------------------------------
% 2. calibration
%----------------------------------------------------------------

gamma = 2.00;
theta = 2.24;
beta  = 0.9224;
alpha = 0.32;
delta = 0.1255;
rhoa = 0.765;
rhog = 0.828;
psi = 0.001;
phi = 3.3;
omega = 1.6;
dbar = 0.007;
gbar = 1.005;

%----------------------------------------------------------------
% 3. model
%----------------------------------------------------------------

model;
h^(omega) = (1-alpha)*y/(theta*x(-1));
(c(+1) - ((theta)*x*(h(+1)^(omega))/(omega)))^(gamma)/(c - ((theta)*x(-1)*(h^(omega))/(omega)))^(gamma) = beta*(1+r);
k = beta*(c - ((theta)*x(-1)*(h^(omega))/(omega)))^(gamma)*(alpha*y(+1) + k*(1 - delta - (phi/2)*((k(+1)/k - g)^2 - 2*k(+1)/k*(k(+1)/k - g))))/((c(+1) - ((theta)*x*(h(+1)^(omega))/(omega)))^(gamma)*(1 + phi*((k/k(-1))-g)));
y = a*(k(-1)^(alpha))*((x*h)^(1-alpha));
ln(a) = rhoa*ln(a(-1)) + ea;
k =  y - c + (1-delta)*k(-1);
r = rw + psi*(exp((d/x)-dbar)-1);
g = x/x(-1);
ln(g(+1)/gbar) = rhog*ln(g/gbar) + eg;
end;

%----------------------------------------------------------------
% 4. computation
%----------------------------------------------------------------

initval;
y = 0.2217;
c = 0.1791;
h = 0.1851;
k = 0.3217;
d = dbar;
r = rw;
a = 1;
g = gbar;
x = 1;
ea = 0;
eg = 0;
rw = 0.04;

end;

steady;
solve_algo = 1;

shocks;
var ea; stderr 0.027;
var eg; stderr 0.03;
end;

stoch_simul;


Does anyone know what I have done to not achieve the steady state? I even adapted some initial values to be close to the model used here.

Thanks in advance

Hi, unless u use exactly the ss value it will not converge.
It's actually easy to compute them since you have already written the code. Just use an fsolve an get the ss values.

You can find a replication file for the model on my homepage at https://sites.google.com/site/pfeiferecon/dynare