I’m currently working on a model with the NKPC device, but I get a bit confused with they way of coding it. I use this functional form,
but regarding inflation equation, should i used this one,
or this one,
Results are strongly different, I don’t get why.
Results are different, because Dynare treats everything with a (+1) as being conditional expectations. Hence, the first equation holds at every point in time, while the second one holds in expectations.
Thanks for you answer jpfeifer.
In your opinion, should I use the first or second one equation ? I get better results with the second one.
Use the one that is consistent with your model.