Hybrid regime solution in Gertler,Gilchrist,Natalucci (2007)
Posted: Thu Dec 03, 2009 2:07 pmHi everyone,
I wonder whether the solution method for the hybrid regime case in Gertler, Gilchrist, Natalucci (2007), "External Constraints on Monetary Policy and the Financial Accelerator" can be applied in Dynare. In the hybrid regime case,the authors assume that as a shock hits the economy, the central bank initially maintains the exchange rate peg and conditional on being on the peg in the current period, it abandons the peg with probability "p" in the subsequent period, where "p" is independent of time. Once off the peg, the central bank reverts to the interest rate feedback rule given by a standart Taylor rule.
Thank you very much for the answers in advance.
I wonder whether the solution method for the hybrid regime case in Gertler, Gilchrist, Natalucci (2007), "External Constraints on Monetary Policy and the Financial Accelerator" can be applied in Dynare. In the hybrid regime case,the authors assume that as a shock hits the economy, the central bank initially maintains the exchange rate peg and conditional on being on the peg in the current period, it abandons the peg with probability "p" in the subsequent period, where "p" is independent of time. Once off the peg, the central bank reverts to the interest rate feedback rule given by a standart Taylor rule.
Thank you very much for the answers in advance.