I am testing different specifications of a model. One version is almost like a static environment. All of the conditions involve contemporaneous variables, except the Euler equation with the expectation of next period’s marginal utility.Then dynare reports " Dynare does not solve purely forward models at higher order." ''2nd and 3rd order approximation not implemented for purely forward models".
Initially I didn’t specify bond because of, say, financial autarky. And there was no capital or other things surviving over periods. The problem disappeared if I specify bond in the budget constraint, albeit B=0 or if I impose stoch_simul( order=1).
I am confused. Can it be explained? Does it mean I have to put (-1) somewhere for higher order approximations, even if (-1) is not necessary on the economic grounds? Moreover,appears dynare doesn’t treat Uc=betaRUc(+1) as Uc(-1)=beta*R(-1)*Uc, does it? And it shouldn’t. Cheers!