Hello, I am confused about the way natural output is defined in the mod file “Gali_2008_chapter_5_commitment.mod” by Professor Pfeifer. Right now it is the same as efficient output, but I thought with cost-push shocks they should be different. I found that in the same mod file for the 2nd edition of Gali’s book (2015) ("Gali_2015_chapter_5_commitment.mod), natural output is defined implicitly as “u = kappa*(y_e - y_nat)”. However, when I plug this condition in to Gali_2008_chapter_5_commitment.mod, the results don’t make sense.
Related to that, I found that in the 2015 file if I change the definition of natural output from the implicit definition to the definition of efficient output (as is currently the case in the 2008 file), the results are identical to the original ones (when natural output is defined implicitly). I am also curious as to why this is the case.
Thank you in advance!