Hi, I’m doing Shmidt Grohe, Uribe “Open economy macroeconomics” chapter3 code.
I want to give permanent productivity shock.
As Y=A*K, I want output (Y) to increase first because of productivity (A), then later increase because of capital (K). Capital doesn’t respond to shock immediately as K_0 is given. How can I do that ?
Here is the code
var
k // capital
y // output
i // investment
c // consumption
tb // trade balance
ca // current account
d; // external debt
varexo a;
parameters
r //interest rate
alpha ;
r=0.02;
alpha=1;
model;
//1.Budget constraint
c+i+(1+r)*d(-1)=y+d;
//2.investment
i=k-k(-1);
//3.output
y=a*(k^alpha);
//4.consuption
c=c(+1);
//5. capital
k=(r/a(+1))^(1/alpha-1);
//6. current account
ca=d-d(-1);
//7.trade balance
tb=ca+r*d(-1);
end;
steady_state_model;
d=0;
k=(r/a)^(1/alpha-1);
y=a*(k^alpha);
i=0;
c=y-i-r*d;
ca=0;
tb=r*d;
end;
initval;
a=1;
end;
steady;
endval;
a=2;
end;
steady;
perfect_foresight_setup(periods=100);
perfect_foresight_solver;
rplot a;
rplot k;
rplot y;
chapter3.mod (750 Bytes)