Before coding in dynare, how can i simplify the equilibrium conditions using log linearization given in the News and Business Cycle in Open Economy by Nir Jaimovich and Sergio Rebelo and dynare coding as well
On log-linearization, see
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=951753 and www3.nd.edu/~esims1/log_linearization_sp12.pdf
I am doing NKM DSGE calibration model for news shock in small open economy. For this i divide total shock into news TFP shock and contemporaneous TFP shock while fixing the contemporaneous TFP zero from period one to infinite, and news TFP shock is also programmed as unrealized news at the end of 4 period.
In this regard, now i wanted to do variance decomposition for news shock since the variance which i found in simulation results seems to have contemporaneous TFP shock as well. Please can suggest me the method for variance decomposition of news shock.
I don’t understand the question. When having news and surprise shocks as in e.g. github.com/JohannesPfeifer/DSGE_mod/blob/master/RBC_news_shock_model/RBC_news_shock_model.mod Dynare’s variance decomposition will provide you with the correct results.