What is endogenous state variable in this simple model?

General DSGE Modeling
5
  1. My reply referred to software implementations. There, usually all states are lumped together as being “endogenous”. Conceptually, lags of exogenous states are of course exogenous.
  2. Your equation for R above is missing the lagged term. Again, the baseline NK model does not feature interest smoothing so there is no state variable. But if you add interest smoothing, a lagged interest rate shows up, which is a state.
1 Like