Hi,there
I wrote a model incorpoarting bank's balance sheet effect and tried to use osr command in computing optimal interest rate rule.
I use common objective function where inflation and output are included, and set weight to 1000 as it is said low values may cause difficulties.
Nevertheless, I can not obtain meaningful result. After interations dynare reports(code named bank1osr is attached):
Improvement on iteration 1001 = NaN
iteration count termination
OPTIMAL VALUE OF THE PARAMETERS:
icpi 1
icy 1
Objective function : Inf
where icpi and icy are parameters in interest rate rule. The model block has no problem and you can run impulse response as you like,while I just can not get optimal simple rule.
What has gone wrong??? I have no idea!!!
The code is attached. I really appreciate it if someone can help.