I’m replicating Chari, Kehoe, and McGrattan (2002), "Can Sticky Price Models
Generate Volatile and Persistent Real Exchange Rates?’’ , The Review of Economic Studies, 69(3), 533-563. However, I encountered a problem when I tried to replicate the real shock part. It is the timing problem.
In the real shock part, the paper states " In each period, first the technology and government consumption shocks occur, then prices are set, and then the monetary shock occurs". I wonder whether we could realize this in dynare.
I think one possible solution is regarding price as predetermined variable, and technology and government consumption enter the equations with lagged form, then real shock realizes in period t-1 and prices are set. The real shock in period t-1 and monetary shock in period t affect other varibles in period t. It seems like first the technology and government consumption shocks occur, then prices are set, and then the monetary shock occurs, but real shock in period t also affects variables in period t, so it doesn’t work. Is there other solutions? Thanks!