Steady State cannot be computed
Posted: Mon Nov 17, 2014 11:49 amHi,
I have the following model (please see attached file). I am trying to find a steady state, and although ALL MY RESIDUALS are zero, dynare cannot compute the steady state. I am attaching in a another file, the steady state version of my model to check that indeed a steady state exists.
I use the [dynamic], [static] tags for computing the steady state of my model. My understanding for the way Dynare works, is that the latter wants to compute the steady state values for the purpose of making the approximations and compute the IRF. The use of the aforementioned tags, I understood, is similar to "instructing" dynare to calculate the steady state model in the way that I instruct. FYI, MY PARTICULAR steady state model still involves expectations but can be computed analytically. Hence, since Dynare cannot understand this I have my steady state model, not to be an immediate consequence of the dynamic model in the way that dynare might understand. I guess this is why I am receiving the following error message:
My model, it includes idiosyncratic shocks which simply cannot washed out in the steady state, and this justifies the expectations operator in the steady state. To put it simply for you, my model includes Aggregate and idiosyncratic shocks. However, the assumptions of the model are such that, that is really as if you have one agent facing two different types of shocks. In consequence, I define as "Steady State" the event where the aggregate shocks are shut down but the idiosyncratic shocks are still in operation. This justifies the expectations operator within the steady state. However, the assumption of the idiosyncratic shocks are such that it allows me to have a closed form solution for the steady state model. To put it simply, since the model is equivalent to one agent facing two different types of shocks, and we want only one of these shocks to operate in the steady state, it seems to me that resembles the case of the "stochastic" steady state. Furthermore, along the dynamic path, the model might resemble the "uncertainty" shocks models with two types of shocks.
So, it seems that dynare ignores my "instructions" to compute the steady state system of equations that I want to calculate and is always trying to recover the steady state equations from the dynamic equations. To make it simple for you, I want to execute the following ``PROGRAMMING ALGORITHM".
1. Compute the steady state values of the SS model as explained.
2. Instruct Dynare to USE those values and do the rest including solving the dynamic model.
Can somehow DYNARE do this thing ? Or according to my explanations is it possible to solve this model at all in dynare? I am reading here and there, that "uncertainty shocks models" are able to be solved in dynare and secondly that dynare can "understand" the "stochastic" steady state in the way I define it before. Thus, my model boils down to an uncertainty shock model with two types of shocks where the approximating should be around the "stochastic" steady steady state (as explained before). So please, can someone tell me whether this is feasible to do in dynare ? If not it might be totally useless for my purposes then.
I have the following model (please see attached file). I am trying to find a steady state, and although ALL MY RESIDUALS are zero, dynare cannot compute the steady state. I am attaching in a another file, the steady state version of my model to check that indeed a steady state exists.
I use the [dynamic], [static] tags for computing the steady state of my model. My understanding for the way Dynare works, is that the latter wants to compute the steady state values for the purpose of making the approximations and compute the IRF. The use of the aforementioned tags, I understood, is similar to "instructing" dynare to calculate the steady state model in the way that I instruct. FYI, MY PARTICULAR steady state model still involves expectations but can be computed analytically. Hence, since Dynare cannot understand this I have my steady state model, not to be an immediate consequence of the dynamic model in the way that dynare might understand. I guess this is why I am receiving the following error message:
- Code: Select all
The solution to the static equations is not a steady state of the dynamic model: verify that the equations tagged by [static] and [dynamic]
are consistent
My model, it includes idiosyncratic shocks which simply cannot washed out in the steady state, and this justifies the expectations operator in the steady state. To put it simply for you, my model includes Aggregate and idiosyncratic shocks. However, the assumptions of the model are such that, that is really as if you have one agent facing two different types of shocks. In consequence, I define as "Steady State" the event where the aggregate shocks are shut down but the idiosyncratic shocks are still in operation. This justifies the expectations operator within the steady state. However, the assumption of the idiosyncratic shocks are such that it allows me to have a closed form solution for the steady state model. To put it simply, since the model is equivalent to one agent facing two different types of shocks, and we want only one of these shocks to operate in the steady state, it seems to me that resembles the case of the "stochastic" steady state. Furthermore, along the dynamic path, the model might resemble the "uncertainty" shocks models with two types of shocks.
So, it seems that dynare ignores my "instructions" to compute the steady state system of equations that I want to calculate and is always trying to recover the steady state equations from the dynamic equations. To make it simple for you, I want to execute the following ``PROGRAMMING ALGORITHM".
1. Compute the steady state values of the SS model as explained.
2. Instruct Dynare to USE those values and do the rest including solving the dynamic model.
Can somehow DYNARE do this thing ? Or according to my explanations is it possible to solve this model at all in dynare? I am reading here and there, that "uncertainty shocks models" are able to be solved in dynare and secondly that dynare can "understand" the "stochastic" steady state in the way I define it before. Thus, my model boils down to an uncertainty shock model with two types of shocks where the approximating should be around the "stochastic" steady steady state (as explained before). So please, can someone tell me whether this is feasible to do in dynare ? If not it might be totally useless for my purposes then.