Impossible to find the steady state

[yufeng]

Dear all:

I am trying to run a DSGE model(fiscal) based on dynare but I am receveing the following error:


??? Error using ==> print_info at 57
Impossible to find the steady state. Either the model doesn't have a steady state, there are an infinity of steady
states, or the guess values are too far from the solution

Error in ==> steady at 92
print_info(info,options_.noprint);

Error in ==> fiscal at 168
steady;

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

after I linearize the model(fiscal1), the error is :


There are 2 eigenvalue(s) larger than 1 in modulus
for 3 forward-looking variable(s)

The rank conditions ISN'T verified!

??? Error using ==> print_info at 43
Blanchard Kahn conditions are not satisfied: indeterminacy

Error in ==> stoch_simul at 81
print_info(info, options_.noprint);

Error in ==> fiscal1 at 223
info = stoch_simul(var_list_);

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

What is the problem with it ?How can I deal with it? This puzzlement had been haunting my mind for a long time,
I appreciate your advice and insight into the problem.Thanks a lot.

[StephaneAdjemian]

Hi, you probably need to think harder about the initial conditions declared in the initval block. For instance you forgot to declare the initial condition for variable tc. If I add tc=c*(gc^rho); in the initval block and set g equal to 0 instead of 1.065 (which is not sensible for a zero mean autoregressive process) in the same block I obtain a steady state. Problem is that this steady state displays a negative consumption level (as a consequence the model cannot be solved), so it is probably not the steady state you are looking for... I think that you need to play with the initial conditions and/or the calibration.

Best,
Stéphane.

[yufeng]

Hi, you probably need to think harder about the initial conditions declared in the initval block. For instance you forgot to declare the initial condition for variable tc. If I add tc=c*(gc^rho); in the initval block and set g equal to 0 instead of 1.065 (which is not sensible for a zero mean autoregressive process) in the same block I obtain a steady state. Problem is that this steady state displays a negative consumption level (as a consequence the model cannot be solved), so it is probably not the steady state you are looking for... I think that you need to play with the initial conditions and/or the calibration.

Best,
Stéphane.

Thanks a lot. I will consider the initial conditions and/or the calibration again.