Hi all
When writing
X(+1)
in dynare it is the expected value of X at (t+1).
I am wondering if there is a way in Dynare to distinguish between
- the expected value of X at (t+1) and
- the realized value of X at (t+1).
Many thanks in advance
Hi all
When writing
X(+1)
in dynare it is the expected value of X at (t+1).
I am wondering if there is a way in Dynare to distinguish between
Many thanks in advance
What do you have in mind? You are writing down a recursive system at time t. If X(+1) is perfectly known at time t, it is predetermined and should get a different timing in Dynare’s timing convention. Otherwise, it will be expected.
Thanks for the quick response
Well, there is a (working) paper that distinguishes between E_t X(t+1) and realized X(t+1). (I can put a link of the PDF)
Obviously does that mean that in Dynare the way to understand your reply is :
write
X(+1)
for E_t X(t+1) and
write
X
for realized X(t+1) ?
This is what you mean when saying
Please provide a link to the paper.
The link to the PDF:
econstor.eu/bitstream/10419 … 918735.pdf
In page 17 of the electronic (or printed page 7 ):
he refers to a variable RL(t+1) as a function of E(t) RK(t+1) in equation (8)
he refers to the same RL(t+1) as a function of RK(t+1) in equation (9)
In eq. (9) it is state contingent because (RL) depends on realized value of RK .
So I wonder how I can make the difference n Dynare ?
Many thanks for looking at it .
It is really a matter of timing. In equations 8 and 9, q_t, K_{t+1}^i, and L_t+1^i and omega_{t+1}^{i,a} are contained in the information set at time t, i.e. known at time t. The latter three are actually predetermined variables (loan stock, capital stock, ex-ante return). The only difference is the return to capital.
In equation 8, you have E_t(R_{t+1}^k). This expected values is known at time t as well, making the whole right-hand side known at time t. Thus, R_{t+1}^L on the left should actually get the timing R_t^L in Dynare, because it is contained in this information set.
In contrast, equation contains an R_{t+1}^k, implying the R_{t+1}^L is only contained in the information set at time t+1. But we are not trying to define an expected lending rate at time t, but the actual lending rate at time t (remember, we are defining a recursive equilibrium system to pin down variables at time t, not t+1). To make this equation state-contingent, i.e. hold for every single state realization, you have to shift the whole equation by one period to the past. You will then have an equation defining R_t^L and linking it to R_t^k and a bunch of predetermined variables.
This post is edited!
Let me assume that I do not use the predetermined_variables command (hence K_t = (1-delta) K_(t-1) + INV_t )… then all the terms in equation (8) will be written with subscript (t), except for ‘’ Rk_t+1 ‘’ which will take the subscript ‘‘t+1’’ in Dynare ? Correct ??
RL_t = Rk_t+1 * omega_t * q_t *K_t *L_t (eq. 8 )
Is he trying to say exactly this: that ''omega_{t+1}^{i,a} ‘’ is predetermined ? Unlike in BGG original paper who take expectations w.r.t both, ''omega_{t+1}^{i,a} ‘’ and ‘‘Rk_t+1’’.
Am I reading it right ?
Regards