Dear all,

I’m very new to both Dynare and econometrics, but have some experience in

computer science and dynamic programming.

Regarding the use of Dynare, I have two very simple questions:

(I read the recommended topics of “martom - Feb 1, 2006, and bigbigben - Sept 28, 2006”

but didn’t get a clear answer)

- I am very confusing about “forward-looking variables” vs. “predetermined variables”.

It seems to me that the statement,

x(t+1) = Ax(t) + b, (x is forward-looking)

is exactly the same as

x(t) = Ax(t-1) + b. (x is predetermined)

## Then, in Dynare how can I know that my variables are forward looking or predetermined?

Unfortunately, I couldn’t find clear definitions about these types of variables.

- This is related to the first question. I want to model the simplest demand-supply equations.

Here, I have 3 endogenous variables: Price, Qdemand & Qsupply and 2 exogenous variables, shock1 & shock2;

Qdemand = Qsupply;

Qdemand = 200 - 5*Price + shock1;
Qsupply = 25 + 12.5*Price + shock2;

Now, Dynare requires me to specify at least 1 forward-looking variable & 1 pre-determined variable; what is the proper way to

specify the time indices in this simplest model? In order to make it work, I specify the time indices as follows:

Qdemand = Qsupply;

Qdemand = 200 - 5*Price(-1) + shock1;
Qsupply(+1) = 25 + 12.5*Price + shock2;

This works fine, but it seems to me quite ad-hoc since Qdemand and Qsupply now are of different types.

Does anyone have any suggestions? I’m very new to this.

Thanks and Kind Regards,

Ratthachat Chatpatanasiri