diff --git a/src/ExprNode.cc b/src/ExprNode.cc
index 650959d3cd8d54fc89bc881f8a9b9c8e62c87de2..6b6555334d2cd744806afbc6229eb184ac21c4bf 100644
--- a/src/ExprNode.cc
+++ b/src/ExprNode.cc
@@ -1636,9 +1636,9 @@ VariableNode::decreaseLeadsLags(int n) const
 expr_t
 VariableNode::decreaseLeadsLagsPredeterminedVariables() const
 {
-  if (get_type() == SymbolType::modelLocalVariable)
-    return datatree.getLocalVariable(symb_id)->decreaseLeadsLagsPredeterminedVariables();
-
+  /* Do not recurse into model-local variables definitions, since MLVs are
+     already handled by DynamicModel::transformPredeterminedVariables().
+     This is also necessary because of #65. */
   if (datatree.symbol_table.isPredetermined(symb_id))
     return decreaseLeadsLags(1);
   else
@@ -1987,8 +1987,9 @@ VariableNode::getEndosAndMaxLags(map<string, int> &model_endos_and_lags) const
 expr_t
 VariableNode::replaceVarsInEquation(map<VariableNode *, NumConstNode *> &table) const
 {
-  /* Do not recurse into model-local variables definition, because otherwise
-     this would substitute MLV in the original model (see #65). */
+  /* Do not recurse into model-local variables definitions, since MLVs are
+     already handled by ModelTree::simplifyEquations().
+     This is also necessary because of #65. */
   for (auto &it : table)
     if (it.first->symb_id == symb_id)
       return it.second;
diff --git a/src/ModelTree.cc b/src/ModelTree.cc
index 4bcbcb24f1f9cdafb4e98cd10605b0d681433436..b540bcb5b24281d7381ab75654e052dbd94ae71e 100644
--- a/src/ModelTree.cc
+++ b/src/ModelTree.cc
@@ -1639,6 +1639,8 @@ ModelTree::simplifyEquations()
   while (subst_table.size() != last_subst_table_size)
     {
       last_subst_table_size = subst_table.size();
+      for (auto &[id, definition] : local_variables_table)
+        definition = definition->replaceVarsInEquation(subst_table);
       for (auto &equation : equations)
         equation = dynamic_cast<BinaryOpNode *>(equation->replaceVarsInEquation(subst_table));
       subst_table.clear();