Hi everyone
I want to include inflation expectation shock in my model. Ascari et al (2022) have included this shock in their model
Ascari et al 2022.rar (2.8 MB)
in p 13:
Now my question is about how to code this issue in dynare.
Should I add two new endogenous variables (and equations )to the model?
pi_e(+1)
and
eps_pi(+1):
pi(+1)=pi_e(+1)exp(eps_pi(+1));
eps_pi(+1)=(rho_pi)(eps_pi)+sigma_pi*u_eps(+1);
var
pi_e
eps_pi
varexo
u_eps
parameters
rho_pi
sigma_pi
Thank you for guiding me in this matter.