Dynare forums

Hi,

Just want to verify some details about the model solving in Dynare.

1. What kind of method is used to solve the linearized model in dynare? (Sim's QZ decompostion, right? )
2.It seems that the result can be expressed in the form
Y(t)=A*Y(t-1)+B*e(t)
and all the variables are put in Y. Then, measurement equation is part of the above equation, right? Is there a straightford way to extract the measurement equations?

Thanks.

1. What kind of method is used to solve the linearized model in dynare? (Sim's QZ decompostion, right? )

Right

2.It seems that the result can be expressed in the form
Y(t)=A*Y(t-1)+B*e(t)
and all the variables are put in Y.

Right, but this is more like a transition equation

Then, measurement equation is part of the above equation, right? Is there a straightford way to extract the measurement equations?

When Dynare is used for estimation, the measurement equation
has the following form
[code]
Y*(t) = M*Ybar + M*Y(t)+X(t) + eta(t)
[code]
where Y*(t) are the observed variables
M is a selection matrix (one only observes a few variables in general)
Ybar is the steady state (this assumes Y(t) represents deviation from steady state)
X(t) is an exogenous linear trend (using observation_trend)
eta(t) is a vector of measurement errors


Best

Michel
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