This is the first time I use Dynare and I have a question, which probably will appear trivial for most of users.
In my model, I have only 2 states determined by the level of aggregate productivity. When the aggregate productivity is high, the state is called “expansion” and there is a probability of 4/5 to stay in the same state next period and a probability of 1/5 to fall in the low aggregate productivity state, called “recession”. When the economy is in “recession”, a probability 1/5 to stay in recession next period and 4/5 to jump in “expansion”.
I just want to know what command I have to use to describe this kind of transitions between states.
Thanks in advance