I’m running a simple model that includes a tax on wages and transfer system between different classes of citizens. I’d like to implement a Markov process that determines which of two systems are in place in each time period, and determined a Markov process would be best.
I’ve searched around and found references to Markov processes in dynare, but I wasn’t smart enough to actually understand everything. I assume this is possible, it seems like it should be.
Could somebody post some example code or a link to an explanation that might help?