Monacelli (2008)

[naturama]

Dear all,

Is there someone that has worked on dynare with the model of Monacelli (2008)?

http://www.igier.uni-bocconi.it/whos.ph ... id_doc=177

I am locked in the following error message:

??? Error using ==> steady_
The seadystate values returned by ultimo_steadystate.m don't solve the static model!

This, although there are really low probabilities of something wrong both in the dynamics and in the steady state equations. Any hints?

Thanks a lot.
Best,
naturama

[Peterpierre]

it seems that your file ultimo_steadystate.m is computing the SS of the model and Dynare just tells you that the values that your file reports are not the SS.

did you check that you are solving correctly for the SS?

[naturama]

Dear Peterpierre,

I also tried to run the model without the file ultimo_steadystate.m and adding the initial values.[The initial values I added were the ones that I got by hand, so, likely, quite accurates]. Now I get:

"There are 6 eigenvalue(s) larger than 1 in modulus
for 5 forward-looking variable(s)

The rank conditions ISN'T verified!

??? Error using ==> print_info
Blanchard Kahn conditions are not satisfied: no stable equilibrium"

Although the model should work with the benchmark calibration I also tried to change the parameter "omega" and [only with steady(solve_algo=0) or steady(solve_algo=1)] I can get the IRFs. Anyway these IRFs don't make sense.

I suspect the problem lies in the .mod file but I don't know where as I already done the usual checks. Any new hints?

Thanks a lot for your reply and for your precious help.
Best,
naturama

[Peterpierre]

if the Blanchard Kahn conditions are not satisfied then your model does not have a stable unique solution. Look the roots to see if you have too many stable or unstable roots.

this is a problem in your model (you have indeterminacy) not in the dynare code, ie., your code in the mod file is probably correct.

Perhaps this paper can help you:
http://ideas.repec.org/p/sce/scecf0/225.html