Trend variables


I’m working on a monetary model with technological and populational growth. Therefore, I should have 3 trend variables: technology growing at rate (1+gt), population at rate (1+gn) and money at rate (1+gm).

I’d like dynare to recognize that (1+gm) = (1+gn)*(1+gt) in the long run, but in the short run they may differ (so my price level changes).

For example, what I’m trying to do is:

trend_var(growth_factor= 1+gx) X; //technological progress
trend_var(growth_factor= 1+gn) N; //population
trend_var(growth_factor= 1+gm) M; //money supply

However, I keep getting the error message that my trends are not compatible.

So… Is it even possible to do this in Dynare? I know it’s possible to detrend the variables, but it would be extremely convenient if I could do it this way.

Thanks in advance,

That should be possible if all variables are cointegrated. An example is at
Did you provide growth factors for all variables?

Hi Johannes,

Thanks for your response. Do you mind if I upload my code so that you can take a look at it?

I can have a look, but cannot promise anything.