Croce Paper: Long-run productivity risk: A new hope for prod

Hi there,

I try to figure out how Croce came up with his Dynare code in order to solve his production-based asset pricing model.
In particular, I do not understand how he came up with the “Investment” equation: “exp(G)”
Furthermore, two equations in “prices and returns”: exp(q1) and exp(d). For the later I found the derivated equation in Croce “Welfare Costs, Long Run Consumption Risk, and a Production Economy.” but I do not get where it comes from.

Can some one help me…please?! :unamused:

I would highly appreciate it. Many, many thanks in advance.


Ps.: I attached the code as well as the paper. I also attached the paper in which I found the equation for exp(d) (p. 20)
MMC_JMP.pdf (567 KB)
long run production risk (1).pdf (718 KB)
Approx_10.mod (4.41 KB)

I solved the “exp(d)” problem. It was just a matter of definition.
However, I still do not get the other to equations.

Thanks for your help :slight_smile: