Iacoviello (2005) model

[MSCstudent]

Hi all,

I have tried a new modelling technique by computing the steady state for this simple Iacoviello (2005) model. I have only missed labour out of the steady state block, which I believe is allowed.
The problem i have is dynare is saying the variable cc is undefined in the declaration of lambda. Could someone help please?

Kind regards,

MSCstudent,

Nottingham university

[jpfeifer]

When using a steady_state_model-block, the steady state for all non-zero variables needs to be provided in a recursive fashion. In your file, you use

Code: Select all

lambda=(BETA-BETATILDE)/cc;


but cc has not been set before.

[MSCstudent]

I'm not sure I quite understand. It has been put in the preamble at the top, what else do i need to do?

[jpfeifer]

As I said, the steady state computation needs to be recursive. Every line of the steady_state_model block needs to be a function of only the parameters and previously computed variables in the block. cc was defined as a variable, but its steady state was not computed when accessing it in the steady state model block.