I try to model the transition from one steady-state to the other;
one of the state-variables is the number of firms which usually evolves according to: M=M(-1)(1-delta)+Me
The problem is the following: upon impact of the shock the number M should drop, because some firms get bankrupt; afterwards M should evolve according to the above equation
Question: how can I manage that M develops differently in the first period?
One possible solution would be to give to flow-equations for M, where the first is valid in the first period and the second in the remaining periods but can I implement this?
Thanks and greetings