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== Second case: endogenous nonstationary process {{{$!latex |
== Second case: endogenous nonstationary process == {{{#!latex |
Automatic removing of trends
Stationarizing a non-linear model by hand is a tedious process that is better done by the computer.
Computing the equilibrium growth rates of a balanced growth model is complicated and will not be attempted here. We limit ourselves to replace non-stationary variables by their stationary counterpart as specified by the user.
First case: exogenous nonstationary process
Assuming that and have common trend , the stationarizing procedure calls for dividing first and second equation by . The second equation becomes meaningless and corresponds to the fact that doesn't belong to the stationary model.
Second case: endogenous nonstationary process
In this case as well, the second equation becomes meaningless after stationarizing the model.