Sum of predetermined variables and a present variable equals a constant

Stochastic simulations
1

Hello,

One of my market clearing conditions is for the real estate sector. I have sum of two pre-determined variables + a present time variable equal a constant stock of housing. Dynare doesn’t give any error and draws the IRFs. But is it erroneous to have such thing in a dsge model? because intuitively the two predetermined variables are set at the previous period and as the real estate stock is constant there would be no space for the present real estate variable (e).
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Thank you in advance.

code4.mod (4.4 KB)

2

Generally, that is not a problem. It implies that H_bar and e must adjust to satisfy the relation.

3

Thank you Prof. Pfeifer for your response, but what I don’t understand is that when H_bar (aggregate housing stock) is a constant (set as a parameter type) how could e adjust itself at present time in IRFs when the other two variables are predetermined.

Edit: never mind, I found my problem.