Greenwood, Hercowitz Huffman wage markup

Good morning,
i have to do an exercise in dynare. i have to suppose that households maximize the utility function used by Greenwood, Hercowitz Huffman (1988), used also by Furlanetto and Seneca (2014). i have to derive the model and calibrate the parameters (with the new steady state) using the loglinearized model and Dynare and simulating a shock to wage markup, but i have no idea how to do with Dynare. Could someone help me ?




Your request is so vague and broad that most probably nobody will be able to help you. If you don’t know how to approach this yet, this is most probably not an exercise for you. First of all, you need to compute the FOCs and derive the steady state. Then you enter these into Dynare.

I have also these files to make this exercise if this could be useful.
it is an assignment for an university class but i have not idea how to start the work.


Usually, you would start by first implementing the original model. All the elements you need are there. You have the FOCs and the steady state. Just enter them into Dynare. might be close in some regards. For the start, work with the nonlinear model, i.e. do not do the loglinearization yet. This will allow you to cross-check your results later on. You may even ask Prof. Tirelli if you can work with the nonlinear model as manual linearization is not really recommended.

After that works, start with modifying the model be rederiving the FOCs when using the different utility function.