Steady state versus transition

[St_aueb]

Dear all

I was just wondering if I could study separately the steady state from the transition in dynare. I am working on 3 period OLG model, which works fine both in the transition and the steady state. But I want to do modification so as to include a capital market imperfection in the model (for example as in Aghion, Banerjee and Piety, 1999, QJE). So I replace the Euler for capital with an ad-hoc rule K(t+1)=vK(t), where v>=1 (line 104 in the mod file). This means that the agent cannot optimally smooth out consumption via savings. Aghion models capital market imperfections in this way in several of his papers.

The thing is that it works OK for v=1, but for v>1 it does not, which makes sense since by definition the only solution is vi=1 (or k(t+1)=k(t)). But in the transition, k(t+1) can differ for k(t) and similarly vi can differ from 1. So is there a way to study separately SS from transition??

Best regards

Stelios
Athens University of Economics and Business