Dynare forums

Hi all,

Both Blanchard-Kahn method and Sims' method consider the expectations error in the system. They introduce this term in order to drop the expectations operators.

In dynare examples, however, I don't see any expectations error or expectations operators. Do we need to consider the expectations error in dynare?

Thanks in advance for any help!

Yes. Dynare by convention assumes a conditional expectations operator in front of every equation when doing stochastic simulations.

jpfeifer wrote:Yes. Dynare by convention assumes a conditional expectations operator in front of every equation when doing stochastic simulations.

Thanks Professor!
So...Since Dynare has considered expectations operator, we do not need to consider the expectations error, right?

What do you mean with

do not need to consider the expectations error

?

You usually do not have to explicitly define one, but you still have to "consider" them so that the Blanchard-Kahn conditions are satisfied.

jpfeifer wrote:What do you mean with

do not need to consider the expectations error

?

You usually do not have to explicitly define one, but you still have to "consider" them so that the Blanchard-Kahn conditions are satisfied.

Sorry for my improper use of words.

I came up with this question becacuse of the attached file, which is a part of Mathematica code for a DSGE model. In that file, besides rational expectations equations and shock processes equations, the author also introduced expectations error equation, which are never seen in Dynare code...

No, you don't have to explicitly introduce expectational errors in Dynare. If you correctly use Dynare's timing convention, they are implied.