Hi, I am new to dynare and wonder if I can run a rational inattention model with Dynare.
DSGE model basically assumes full-information rational-expectations but I want to introduce rational inattention with information constraint into my DSGE model. Can I model this with Dynare?
Which particular model did you have in mind? I guess the general answer would be no and you may have to rely on e.g. EconPapers: Linear rational-expectations models with lagged expectations: A synthetic method
Thanks for the reply! So when Dynare solves a DSGE model involving Et-1 (using Expection (-1) command), it follows the approach in this paper?
No, the paper linked is about rational inattention. the E_{t-1} refers to normal rational expectations modeling.
Thanks for the reply. Then how does dynare model rational expectation model with both Et and Et-1 in it?
You can do that by defining auxiliary variables and equations. You can define
x_{aux1,t}=E_t(x_{t+1})
Its lag will then be equal be E_{t-1}(x_t)
Thanks! Could I ask one more question? I want to solve a DSGE model with Et and Et-1 in MATLAB. So I would like to know which approach Dynare is using.
Dynare will simply introduce auxiliary variables as shown above.