Smoothed expected variable


Dear Johannes,

I have both ct (consumption in period t) and ct+1 (Expected consumption in period t+1).

Could I ask :

  1. how to get the smoothed ct+1 after estimation ?
  2. If Dynare does NOT treat ct+1 as second period of ct , then how does Dynare do with ct+1?

Many thanks in advance



to get the smoothed ct+1 define a new endogenous variable (call it as you want) as follows

c_t_1 = c(+1);



Yes, as Paolo said, you need to define an auxiliary variable storing the expectated value (as one would do in case of Epstein-Zin preferences as well). A more explicit version, using the EXPECTATION operator would be

c_t_1 = EXPECTATION(c(+1));