Linearisation vs Log-linearisation

General DSGE Modeling
4

@stepan-a’s answer relates to the distinction between linearization (absolute deviations) and log-linearization (percentage deviations). Dynare by default only does linearization. To get a loglinearized version, you can either

  1. do the exp() substitution suggested above
  2. invoke the loglinear option
  3. define the log-levels as auxiliary variables as in e.g. https://github.com/JohannesPfeifer/DSGE_mod/blob/master/Jermann_Quadrini_2012/Jermann_Quadrini_2012_RBC/Jermann_Quadrini_2012_RBC.mod

However, for my point in Solving a DSGE Model this does not matter. In both cases the model would be linear (either in logs or levels) and second order derivatives would be 0.