I am workin with model by Gambacorta and Signoretti Should monetary policy lean against the wind?: An analysis based on a DSGE model with banking, where I have tried to implement OccBin package within Dynare to see how the model behaves with the occasionally binding constraint. For this, I used Dynare manual and also followed code provided by Professor Pfeifer borrcon.mod
However, I am puzzled with how to include lead variable into the borrowing constraint, i.e. price of the capital
I know I should define an auxiliary variable for that, but I do not know how to proceed and how to do this.
One more thing - the reference regime I have chosen is the one where borrowing constraint binds.
Can I use the regime where constraint binds as a reference regime? In Dynare manual it is said
in the baseline (non-binding) regime, which to me means that non-binding regime is the reference one. In general, is there any difference which regime to choose as a reference one?
Would be very happy to get any comment or suggestions!