Dear Johannes,
I have seen two types of specifications about capital in the production function, one is that capital is lagged, e.g. Kt-1, the other one is that capital is not lagged, e.g. Kt, I am wondering why some literature uses lagged capital while other literature uses non-lagged capital, is there any assumption about the usage of capital to make it lag or no lag in the production function?
Thank you very much and look forward to hearing from you.
Best regards,
Jesse
Hi Jesse,
the timing specification with K_t-1 is the end of period definition for predetermined variables, ie capital in t was already determined in t-1 and hence is called K_t-1. The other naming convention is beginning of period, which you see in many papers and textbooks. Fundamentally they both mean the same thing, important is that Dynare uses the end of period scheme.
Hope this helps.