Lagged Expectations

[jpfeifer]

See

End of period convention and decision lag

Actually, from what you describe, I think the law of motion for n should be n_t =(1-rho_{t})n_{t-1}+m_{t} You inherit employment n_{t-1} from the previous period, some matches dissolve based on rho_t and you get new matches m_t. This is similar to the law of motion for capital. Alternatively, you could shift the whole equation by 1 period: n_{t+1} =(1-rho_{t})n_{t}+m_{t} and use predetermined_variables n Regarding the limited information assumption, you need to change the information set of t…