Download Octave & Dynare

Once GNU Octave and Dynare are installed, a few simple commands are all you need to prepare your environment and start running Dynare models. The steps below show you how to add Dynare to Octave's path, set your working directory, and make sure everything is properly configured before running your first .mod file. These basic setup commands are useful whenever you start a new Dynare project or need to configure Octave on a new computer. 

STEP 1: Add Dynare to the Octave Path

The first step is to tell Octave where to find Dynare's commands and functions. In Octave's Command Window, copy and paste the following command. In this tutorial, we are using Dynare version 7.2, so the path below points to the 7.2 folder. If you installed a different version of Dynare, make sure to replace 7.2 with the version you have installed. 

addpath('C:/dynare/7.2/matlab')

This adds Dynare's MATLAB/Octave functions to Octave's search path, allowing you to run Dynare directly from the Command Window. 

STEP 2: Create the Main Folder to store your models and output files

Before running our models, we need a dedicated folder where we can store our Dynare models, scripts, and results. Keeping these files separate from Dynare's installation folder helps us avoid mixing our own work with Dynare's main files.

In this tutorial, we create a folder called econtutorials inside C:/dynare. You can create it manually using your computer's File Explorer, or directly from Octave with:

mkdir('C:/dynare/econtutorials')

The mkdir command stands for make directory and creates a new folder at the specified location. 

STEP 3: Set the Working Directory

Once the folder has been created, we need to tell Octave to use it as our working directory. This is the folder where Octave will look for our model files and where files generated by Dynare will be saved.

Run:

cd('C:/dynare/econtutorials')

The cd command means change directory. It moves Octave from its current folder to the directory we specify.

You can confirm that Octave is now working in the correct folder with:

pwd

The pwd command means print working directory and displays the folder Octave is currently using.

STEP 4: Run a Dynare Model

Once Dynare has been added to Octave's path and our working directory is correctly set, we are ready to run a Dynare model.

In this tutorial, our model file is called rbc_damico.mod. To run it, simply enter:

dynare rbc_damico.mod

The dynare command tells Octave to pass the .mod file to Dynare for processing. Dynare will then read the model, solve it, and generate the corresponding output and result files in the working directory. 

What is Octave?

GNU Octave is a free, open-source programming language designed for numerical and scientific computing. Its syntax is largely compatible with MATLAB, making it a popular alternative for students, researchers, economists, engineers, and anyone working with mathematical models or numerical analysis.

Octave can be used for tasks such as matrix operations, statistical analysis, numerical optimization, solving systems of equations, differential equations, simulations, and data analysis. It can be used interactively through its command line or to run complete scripts and programs.

One of Octave's main advantages is that it is free to download and use, while offering many of the numerical computing capabilities commonly associated with MATLAB. It can also be extended through user-written functions and additional packages.

For economists in particular, Octave can be useful for macroeconomic modeling, simulations, econometrics, and computational economics. It can also be used with software such as Dynare to solve and simulate DSGE and other dynamic economic models.