DSGE Model with Growth Rates

General DSGE Modeling
1

Hello everyone,

I am currently solving and linearizing a multi-sector DSGE model in which we have labor-augmented technological growth (A_t = A_0 * (1 + g)^t) and thus in my model w_t and c_t grow at a constant rate in steady state and \lambda_t shrinks at the same rate in steady state.

What does this mean for the solution of the model, the specification of the steady state conditions and the logarithmization of the equations, since the steady state values are different in each period?

e.g. would the steady state value of c_t be c_ss * (1+g)^t? Or A_ss * (1+g)^t?

Thank you very much!

2

If you are trying to do stochastic simulations, you need to detrend your model, either manually or using Dynare’s trend_var-comand.