Dear DGSE experts,

The following model is famous simple 3 equation forward-looking NK model with forward-looking Taylor rule. I know the following model is easily solved using Dynare.

[code]model(linear);

//CB model

# kappa = (1-theta)*(1-theta*beta)/theta;

```
y = y(+1) - (1/sigma)*(R - pi(+1)) + g;
pi = beta*pi(+1) + kappa*y + z;
R = rhoR*R(-1) + (1-rhoR)*(phipi*pi(+1)+phiy*y) + em;
// process of preference/cost shocks
g = rhog*g(-1) + eg;
z = rhoz*z(-1) + ez;
```

end;[/code]

However, when I tried to solve this using Uhligâs toolkit, I couldnât figure out what is endogenous state variable in this model, which was necessary to construct matrices for Uhlig toolkit.

I know that capital is the endogenous state variable in RBC model, but there is no capital in this NK model. There are 3 endogenous variables (y, pi, R) in this model, and they donât seem to be state variables.

Is there anyone who kindly help me to figure it out?

Thank you in advance.

Regards,

Leo

Please someone help me to understand thisâŚ