variables with negative values - linearization vs loglinear
Posted: Tue Jun 12, 2012 10:49 pmHi,
I have a question concerning my model and the way we enter it into Dynare.
I loglinearized my model by hand and entered it into Dynare. However, now I read that if a variable can take also negative values, you cannot loglinearize it. And I have such a variable in my model!
Can I simply linearize then the 1 equation defining this variable and leave the rest in the loglinearized form? How will then Dynare interpret it with respect to other equations containing this variable and how should I then interpret the IRF? Because for the rest, these are percentage deviations from ss. And for linear models, simply level deviations from ss? Can I then have both in one code?
Or should I linearize all equations containing this variable? Or maybe the whole model?
I would be thankful for help.
I have a question concerning my model and the way we enter it into Dynare.
I loglinearized my model by hand and entered it into Dynare. However, now I read that if a variable can take also negative values, you cannot loglinearize it. And I have such a variable in my model!
Can I simply linearize then the 1 equation defining this variable and leave the rest in the loglinearized form? How will then Dynare interpret it with respect to other equations containing this variable and how should I then interpret the IRF? Because for the rest, these are percentage deviations from ss. And for linear models, simply level deviations from ss? Can I then have both in one code?
Or should I linearize all equations containing this variable? Or maybe the whole model?
I would be thankful for help.