Dear Professor Pfeifer,
I want to add a shock on capital stock. I search the forum and find your code of RBC_capitalstock_shock.mod which makes a typical example. I just want to make sure that:
(1) In the notation of the code, you said that “the timing for k in all other equations changes to being contemporaneous” and the the law of motion for capital is written as
exp(k) = exp(-eps_cap)*(exp(invest(-1))+(1-delta)*exp(k(-1)));
So in other equations which include variable “invest”, I sould substitue it by
and calculate derivative with respect to k(+1). Is this correct ?
(2) In your code, eps_cap is exogenous variable. I wonder if I could use the code as follows:
exp(k) = exp(eps_k)*(exp(invest(-1))+(1-delta)*exp(k(-1)));
exp(eps_k) = (1 - rhokUU) * 1 + rhokUU * exp(eps_k(-1)) + e_k;
in which eps_k is endogenous variable and e_k is the exogenous one. Is this correct ?
The bayesian estimation results on the two types of introducing capital shock above are quite different and I have no idea about the reason.
Thank you for your time, Professor.