It’s widely known that there exist two price setting pattern “time-dependent pricing and state-dependent pricing”. It’s very complicated to estimate a DSGE model with a state-dependent pricing and I have no idea of how to realize it in dynare 4.3. The working paper “Inflation in poland under state-dependent pricing” already sloves the problem in dynare. Does anyone know how to realize it in the dynare and matlab environment. I will appreciate for your sincere reply.
Hi jpfeifer ,can you help me solve this problem??
There is no simple answer. In full generality, there is no way you can do it in Dynare. The author’s of the paper you cite use considerable simplifications to the state-dependent Phillips Curve that make it doable in Dynare. Maybe you can follow their lead.