Hi everybody,
I desperately need to log linearize the optimality condition of the calvo wage setting optimization problem in SW 2003 in order to obtain the wage equation (33 in the original version), as I come up with something completely different from the equation in the paper. Does anybody have some hints or some guide that would be useful not to get lost in the calculations? Thank so much everybody
To identify the source of the differences, sometimes it’s helpful to check that your derivation leads to an equation that coincides with the one you want to replicate under special cases (no indexation, no habit, etc). You may also want to check these notes by Marco del Negro and Frank Schorfheide.
1 Like