Thanks Johannes,

in this model the problem comes from the 2 unit roots. It doesn' t make sense to ask Dynare to solve for the steady state of a non stationary model.

With initval, the user selects one of an infinite number of solutions for the static equations. But even with initval, it would not work if initval did not provide the exact solution for obs_r_h.

I will add at some point a discussion of models with non-stationary variables, but probably not in the paragraph about linear option of model keyword

All the best,

Michel


On 07/06/2012 12:21 PM, Johannes Pfeifer wrote: 
Dear Michel,

if you comment out the initval-block in the attached file, Dynare does not solve the model anymore.
Best,

Johannes

-----Ursprüngliche Nachricht-----
Von: dev-bounces@dynare.org [mailto:dev-bounces@dynare.org] Im Auftrag von Michel Juillard
Gesendet: Freitag, 6. Juli 2012 12:04
An: List for Dynare developers
Betreff: Re: [DynareDev] linear option in stoch_simul

Thanks Johannes,

On 07/06/2012 09:47 AM, Johannes Pfeifer wrote:

1. I agree with Sébastien to drop the option. From my experience it creates more confusion than it's worth. The confusion in this specific case might arise from the manual saying that one should rather put "linear" in model(linear). This suggests that it is indeed equivalent to stoch_simul(linear). However, the manual says that model(linear) sets order=1.

This seems to be the majority opinion so far...

2. By the way: the manual states that using model(linear) spares one from specifying initval. This is not really true as linearity per se implies that there can be constant terms that need to be taken care of. In particular, I have seen a few mod-files in the forum that use a Taylor rule with the target interest rate as a constant. Hence, although the model is linear, the steady state of the interest rate is not 0 and Dynare crashed.

If the model is linear, Dynare computes the steady state directly using linear algebra, without needing initval, even if there are constants in the model. Could you please point me to an example where Dynare crashes in such a case? Thanks in advance.

Best

Michel


--
Johannes Pfeifer
Haußerstr. 29
72076 Tübingen
Tel.: +49-(0)7071-6396184
Mobil.: +49-(0)170-6936820
Germany


-----Ursprüngliche Nachricht-----
Von: dev-bounces@dynare.org [mailto:dev-bounces@dynare.org] Im Auftrag 
von Sébastien Villemot
Gesendet: Donnerstag, 5. Juli 2012 18:15
An: List for Dynare developers
Betreff: Re: [DynareDev] linear option in stoch_simul

Michel Juillard<michel.juillard@mjui.fr>  writes:


Fujiwara, Ghironi and Bilbiie sent me a message saying that
stoch_simul(linear) doesn't report the same results in 4.3 as in the 
previous version. But they use it with a nonlinear model!
I check the manual and we say explicitly that LINEAR declares that 
the model is linear not to use a linear approximation.
I guess that before version 4.3.0, we forced order=1 when the linear 
option was used in stoch_simul. But, as it is both contrary to the 
manual and confusing, I would be tempted of forbidding LINEAR as an 
option of stoch_simul, but this will break existing *.mod files.
Or we can be nice to users, and keep interpreting LINEAR as identical 
to order=1, but we must correct the manual.

What do you think? We may need to check older documentation to 
understand how the confusion got about.

I would rather drop the linear option from both stoch_simul and model, since I still don't understand its purpose.

--
Sébastien Villemot
Researcher in Economics&  Debian Maintainer 
http://www.dynare.org/sebastien
Phone: +33-1-40-77-84-04 - GPG Key: 4096R/381A7594


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