I have a very basic question, how can I make sure which equations to use in my model part, can i use only the final equations? like IS curve, NKPC and monetary policy equation? if yes, should i use only the variables in these models and ignore the rest? what about parameters? if i had a compound parameter in one of these three equations, should write it down as a parameter in parameter block or model local variable in model block?
- Your model must always be closed, i.e. have as many equations as variables. Of course, you can substitute out variables that do not interest you as is the case in the 3 equation New Keynesian model. But that does not mean you can
- Regarding parameters, I would always recommend using model-local variables or a
steady_state_model-block to handle dependence. That way, you mod-file will be useable for various purposes like estimation. For an best-practice example, see e.g. https://github.com/JohannesPfeifer/DSGE_mod/blob/master/Gali_2015/Gali_2015_chapter_3.mod
Thank you very very much, my model includs heterogenous households but for IS curve, NKPC we have merged the families based on their share. Using these I was hoping to be able to ignore lack of some data about heterogeniety, so should i use heterogenous data? Is there any mod example for heterogenous households you could offer
What do you exactly mean with heterogeneity? Two types of agents? Your explanation is rather abstract.
Thanks for your attention, by heterogeneity I mean two types of family, rule of thumb family, who don’t save, and a normal family with inter temporal consumption function and Euler equation
Have a look at the Gali et al. 2007 Rule of Thumb consumer paper. There you can see that you can work with the aggregated variables.
thank you very much for the help,Can i get help for another question? How can i know that how many and which initial values should i use? i have seen initval components even equal or less than endogenous variables. another question would be how can i find their quantity. would you please tell me or introduce an easy reference? I know the questions are so banal, sorry for that
If a variable is not explicitly set, its initial value is assumed to be 0.
See Remark 15 (initval vs. steady_state_model vs. steadystate-file) in Pfeifer(2013): “A Guide to Specifying Observation Equations for the Estimation of DSGE Models”
hello dear prof. i am facing problem with my code.
the error is:
Configuring Dynare …
[mex] Generalized QZ.
[mex] Sylvester equation solution.
[mex] Kronecker products.
[mex] Sparse kronecker products.
[mex] Local state space iteration (second order).
[mex] Bytecode evaluation.
[mex] k-order perturbation solver.
[mex] k-order solution simulation.
[mex] Quasi Monte-Carlo sequence (Sobol).
[mex] Markov Switching SBVAR.
Using 64-bit preprocessor
Starting Dynare (version 4.5.1).
Starting preprocessing of the model file …
ERROR: bilbiie1.mod: line 24, col 43: syntax error, unexpected ‘;’
Error using dynare (line 217)
DYNARE: preprocessing failed
I have checked all ‘;’ in my code and i dont think they have any problem, could you please help me?
bilbiie1.mod (1.4 KB)
There is a closing bracket missing in line 24 before the