Dear Professor Pfeifer,
Many thanks for having selected my post.
I have tested your code RBC_baseline by building an alternative version in which the parameter psi is defined as an endogenous variable - see attached.
This alternative way of coding the labour disutility parameter to hit labour in steady state seems to lead exactly to the same results. However, there is an advantage as one can see the value of the parameter in steady state and this would not be possible by defining the psi in the parameter block.
This is from the endogenous variable version:
Going back to my initial question. In the NK model, I extrapolate the labour disutility parameter by combining the wage supply and the wage demand. Unfortunately, this leads to:
which, then results in a negative value for the parameter.
Do you think this to have economic sense?
Many thanks in advance.
dynare.zip (95.8 KB)