Problem with DSGE modeling

General DSGE Modeling
1

Dear Professor Pfeifer,

Thank you for reading this post.

I have got a little difficulty in understanding the depreciation parameter of housing stock, which is generally appeared in the DSGE model about real estate. Does it mean the ratio of demolished house in every period ?

More importantly, if I consider about adding an endogenous demolition of housing stock, is it workable to realize this in a DSGE model ? I have no idea how to add it into the model as few paper talking about it.

Any advice will be appreciated, thanks again.

2

No, it’s more about the regular depreciation of houses, i.e. the constant wear and tear. Every 25 years the roof needs to be redone, but the wear and tear accumulates gradually over time.

https://static.norges-bank.no/globalassets/upload/english/publications/working-papers/2011/norges_bank_working_paper_2011_2.pdf might be relevant.