I am currently working with a DSGE model which includes land, like the one by Iacoviello and Neri. In these models land becomes part of the optimisation problem of entrepreneurs/firms. I have derived the first order conditions and steady states, in which I normalise the value of land to 1.
Before I start entering the model into dynare, I wanted to ask how I have to deal with this normalisation of land. Do I have do declare land as a model variable and set it later equal to 1 in the model block? Or what would be the correct procedure?
I would be grateful for any help I could get regarding this issue.