Nonzero residuals

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Nonzero residuals

Postby xyz » Mon Jun 27, 2016 7:12 am

Hello everybody,

I am still working on the paper "Optimal monetary and fiscal policy in a currency union" by Gali and Monacelli (2008).

The model is running but I get non-zero residuals for my market clearing equations. The residuals are not even close to zero but there rather seems to be an error in my coded equations.

Can anybody explain me why these residuals are non-zero and how to solve this problem?

Thank you very much!
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Re: Nonzero residuals

Postby jpfeifer » Mon Jun 27, 2016 9:44 am

My guess is because you are mixing linearized and level equations. For example, your equation (4) is equation (25), but it should most probably be (26)
------------
Johannes Pfeifer
University of Cologne
https://sites.google.com/site/pfeiferecon/
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Re: Nonzero residuals

Postby xyz » Mon Jul 04, 2016 4:32 pm

Dear Prof. Pfeifer,

thank you for your reply. I first tried to use Eq. 26 but then I was unsure how to correctly specifiy it in my code.

How do I find the steady states value of y, c and g in order to use Eq 26 and express these variables as deviations from their steady state?

Kind regards
xyz
 
Posts: 12
Joined: Fri Dec 11, 2015 2:33 pm

Re: Nonzero residuals

Postby jpfeifer » Mon Aug 01, 2016 7:47 am

You need to start from the nonlinear model. Unfortunately, that is not easy.
------------
Johannes Pfeifer
University of Cologne
https://sites.google.com/site/pfeiferecon/
jpfeifer
 
Posts: 6940
Joined: Sun Feb 21, 2010 4:02 pm
Location: Cologne, Germany


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