I have a normalized utility and production function in my model. I have computed the CPOs according to that normalization and I have calibrated to model from these at SS. My question is how to code normalized functions in Dynare.
Should I declare all points of normalization as parameters ? But shouldn’t the point of normalization move through the years? In my case, the point of normalization Ive chosen is the sample (geometrical) average as advised by Klump et al. (2011). For example, the geometrical average for capital would be 11 billion euros from 1995 to 2017. But as I run the model on Dynare, this value should take into account the years after 2017, or the point of normalization will stay at the value based on 1995-2017 data.
Or should I just enter the model in the non-normalized case, but that would be bizarre as my substitution and distribution parameters are calculated from a normalized form and not a non-normalized one.
Thanks in advance.