Hi
I am a novice and I have reached a contradiction. please correct my mistake. Thanks in advance
Productivity comes in two forms in the models(As far as I have seen):
Of course, I know these two are one, but the models use one of these two forms
Now when we want to calibrate the steady state:
According to the first method:
Log(A)=rho_A*log(A) Therefore A=1
According to the second method: A=1
Now my question is about the other shocks. For example, shock to government spending in the RBC model(DSGE_mod/RBC_baseline.mod at master · JohannesPfeifer/DSGE_mod · GitHub)
If we use the following form:
g_ss=g and g=gshare*y;
That is, g_ss is not necessarily equal to 1. It depends on gshare
That is reasonable
But if we use the second form:
In the steady state:
Log(g)=rho_g*log(g) Therefore g=1
That is, in other equations, if we have g, we put it equal to 1(in steady state).
What is my mistake??