Hi to everybody.
I have been trying to replicate the paper ‘Monetary and Macroprudential Policies under Fixed and Variable Interest Rates’ by Margarita Rubio. I wonder how to use dynare to deal with the following form of equation. See attached. The variables are log-linearized, and the equation can be found in the Appendix of the paper. I’d be very glad to receive any feedback. Thank you very much in advance.
equation.pdf (10.7 KB)
Monetary and Macroprudential Policies.pdf (222 KB)
You need to express the equation in recursive form. I tried it quickly in the attached document. Please check carefully whether I did a mistake somewhere. Somewhere in between you need to make use of the law of iterated expectations.
recursive_rubio_2010.pdf (58.4 KB)
That is right. Thank you for your reply, it’s very helpful.