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?!

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

Best,

Stefan

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)