Negative variables inside in model(linear)

General DSGE Modeling
1

Hello,

I have log-linearised the equations (by hand) and entered them inside the model(linear) block. Now the problem is some variables e.g. net foreign asset, can take negative values. In this situation, it is recommended that you linearize the relation rather than log-linearize.

This is easy when you use “exp()” style. As you just have to write the equation having negative variable without exp() and dynare will linearize it.

But when I am writing my model inside model(linear) option, how should I enter variables that can be negative.

E.g. suppose B can take negative value. And the equation is: (NX: net exports)
B_t+1 = B_t + NX_t
how should i enter this inside model(linear) block?

2

The problem is not that B_t can be negative. The issue would be if the steady state of B_t is negative.

3

Ok Professor, thnx for clarifying. Let me work out the problem again.