I am trying to replicate the models of the chapter regarding Modeling Great Depressions: The Depression of Finland in the 1990s of the Great Depressions Book of Kehoe and Prescott and my main concern is how to introduce exogenous time series into the model. They run a basic neoclassical growth model but introducing exogenously time series for TFP. I cannot figure how to do this in Dynare.
Your answer is essentially contained here:
[Simulate a model using smoothed shocks)
Dear Dynare Expert,
Thank you very much for your reply. I am not sure if that solves my problem because I am not referring to stochastic simulation. I just want to run a deterministic simulation but using exogenous series for the endogenous and exogenous variables, just the same as the codes used in the book that I mentioned.
I am not sure if this is possible in Dynare, it should be but I cannot figure out how and where to introduce the series. To be more precise, what I need to do is to run the basic neoclassical growth model (model1.mod) but instead of using the initial and end values and instead of calculating the steady state I assume that the economy is in a balance growth path and so I introduce series for K, L, and A and compare then the series generated by the model with the series of the data.
Thank you very much
I see. I found the paper and they are really simulating the model under perfect foresight. Your answer can be found in the manual in the section about “Shocks on exogenous variables”. Define your TFP shock as an exogenous variable and put your TFP shock estimates from the growth accouting into a column vector, e.g. named xx. Then define a shocks block of the type:
where T is the last time period you want to simulate.
Dear Dynare Expert,
Ok, thank you very much. One more question. I am trying to load the series for TFP using the initval_file command but it doesn’t work, couldf it be because I am using the Dynare 3 version?
I don’t know. Dynare 3 is not supported anymore and a lot has changed over the years. I tend to say yes.
Without more information on what you are doing and why in Excel, it is impossible to tell.
I see. I am not much of an Excel user. I don’t think it is an appropriate tool for solving problems of this kind.
Kindly please suggest me a tool for solving this.
I would use Matlab, but other tools with proper solvers should work as well.