Expected value of a power

[jpfeifer]

Code: Select all

exp(-V(+1)/chi)/E_t[exp(-V(+1)/chi)]

again has the expectations around both expressions and is identical to 1.
You are not using a nonlinear transformation of the expectations themselves.

[farukakbal]

I believe i did the nonlinear transformation using the nonlinear function exp().

Code: Select all

EV = -(V(+1)/chi);

exp((-V(+1)/chi)-EV);

Does second line perform a nonlinear transformation right?

As a 2nd option i have written the expression at top as:

Code: Select all

(1 + (1/1)*(-V(+1)/chi-EV) + (1/2)*(-V(+1)/chi-EV)^2 + (1/6)*(-V(+1)/chi-EV)^3)

(which is actually a 3rd order approximtion around 0) so that i can solve the model with order=2. The IRFs are still same.