One of my equations is as follows:
I linearized this equation:
and wrote its dynare code in the same way.
The error that dynare pointed out to me was as follows:
WARNING: you have declared your model ‘linear’ but you are using a function (max, min, abs, sign) or an operator (<, >, <=, >=, ==, !=) which potentially makes it non-linear.
My first question is whether my linearization is correct? In fact, I did not consider the maximum in the linearization. I do not think this is correct !!!
My second question is, should I consider the model nonlinear?
Is there a similar model with dynare code available that I can use?