Hello everybody, I am trying to specify a open economy model, but I don’t know how to specify the process for the foreign price. Do anybody have some suggestions?
Thank you
Andrea
Dear Andrea,
If you are building a small open economy model the (relative) foreign price is exogenous and may be modelled as an ARMA process. Such a stochastic process can be easily defined in Dynare.
Best, Stéphane.
Ok thank you very much
Andrea