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,