Hello, in my model I decompose unemployment into trend and cycle and I would like to estimate both components. My observed variables are unemployment and a dummy for recession periods. My model equations are as follows: u = trendu + cycleu trendu = trendu(-1) + mu + e_trendu (i.e. a random walk …

See [image] A nonstationary model for output gap with a const in drift General DSGE Modeling The problem is that Dynare tries to approximate around the steady state, which does not exist if there is a drift. But as the model is already linear, the approximation point does …

Estimation of the trend and cyclical component of unemployment - how do I find the steady state?

Estimation ML/Bayesian estimation

jpfeifer 6 August 2023 08:57 6

That is no straightforward to achieve. See e.g.

and