Exogenous tradable goods price in a two sector model

[HelloDynare]

@kofiemma

EDIT: p^N_t is normalized to 1. Maybe I can relax that assumption and bring that variable back? Like if model variables exceed equations, then normalize one price to one? If the opposite is the case, then do not normalize any price? Some kind of a trick…?

My own experience for foreign variables,

1. if they are important, you may want to have a full analysis on them, model them in a two country model, or at least put them in equal-numbered foreign equations.

2. if they are less important, model them as AR(1), in an SOE model

3. if they are less less important, model them as constants (care about the relative prices between them)

4. if they are least important, normalize them to 1.

cross-reference for point 1:

Question on Foreign country modelling

Hello everyone, I’m a novice in Macro and Dynare. Recently, I read a paper:annotated International spillovers and exchange rate dynamics.pdf (413.0 KB) As annotated on page 11, 17, and 22, Corsetti et al. first model the dynamics of Foreign country, and next given them, model the Home country. I expect it will produce more dynamics of Home country than usual SOE literature, i.e. directly setting exogenous Foreign variables be constant. (If my understanding was wrong, please kindly point it out…

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Regarding the interaction between deep learning and DSGE, you can have a look at:

DP14024-3.pdf