I am trying to log-linearise my model and I am not quite certain how this is implemented in Dynare. Looking at my first equation:
To my understanding, in order to log-linearise this eqation I would need to do the following:
â= log a - log a’
ê= log e - log e’
the prime indicates the steady state value
How does this translate to Dynare? Michel had written in an earlier post:
F(X_t)=0 original equation
lx_t = log(X_t)
According to this, I would write my equation as:
where ln_a= log(a)
Is this correct? How does this relate to the transformation above?
If this is correct, how would I correctly define this in the model. Would this be in the initval section where I declare the ss values as ln_a=log(a)? Does this interfere with the fact that my ss values of my endogenous variables for the linear case would be all zero?
Thank you for your help,