Problem with exogenous variables

Stochastic simulations
1

Hello, I’m new at DSGE modelling and I’m trying to replicate Horvath and Yang (2022) * Unemployment dynamics and informality in small open economies*. I have the 12 equations and 12 endogenous variables, but I do not know how to compute three exogenous variables in my code. These are: inter, zi and zf and follow (in this first replication) the same process:

x_t = rho_x*x_{t-1} + eps_x

If i compute those three equations in the model block, Dynare does not compute. The error is there is 20 equations and 17 endogenous variables, and I understand that the difference is caused by the three exogenous variables that are defined in the model block. But, in addition to that, I only define 12 endogenous variables and I do not know why it shows me 17.

This is my code.

HY.mod (2.6 KB)

2

It also includes more errors

image
image921×205 5.5 KB

I don’t understand the substitution of exo leads and lags.

3
  1. In Dynare, only the shocks are varexo. For
    exp(inter) = rho_sp*exp(inter(-1)) + eps_sp;
    exp(zi) = rho_zi*exp(zi(-1)) + eps_i;
    exp(zf) = rho_zf*exp(zf(-1)) + eps_f;

your need

var inter zi zf;
varexo eps_sp eps_i eps_f;

That should give you the missing three variables.

4

Thanks, now I see and understand.