Exogenous variables in DSGE

General DSGE Modeling
1

Good morning everyone,

I was wondering if Dynare, in a perfect foresight setup, treats the exogenous variables as “constants” if one does not apply shocks to these variables, since they do not react to the model equations.

I often see papers, in a deterministic environment, which assign temporality (the “t”) to exogenous variables in their equations, while these variables are really “constants” and should not be indexed by “t”. That’s just a “drafting issue” I’m asking there.

Thanks!

Best

2

Yes, they are constants in this case. But if they can generally change, e.g. because later on you consider different experiments with different values, people sometimes use a time index. I agree that this can be confusing if you denote something as a variable that is actually a parameter.

3

Thanks :slight_smile:

Best,