Non-differentiable equation in model block?

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Non-differentiable equation in model block?

Postby dbmler » Mon Aug 08, 2016 11:09 am

Hello,

I am trying to implement a non-differentiable equation in the model block. Is this possible?
More specifically: I'd like to give the Taylor rule an absolute minimum such that nominal interest rate cannot fall below a certain point. For that purpose this equation would need to have a kink at some point. Is this somehow possible in DYNARE?

Thanks in advance!
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Re: Non-differentiable equation in model block?

Postby jpfeifer » Mon Aug 08, 2016 12:44 pm

This only works in a perfect foresight context, i.e. not with perturbation techniques. See https://github.com/JohannesPfeifer/DSGE_mod/blob/master/Gali_2015/Gali_2015_chapter_5_discretion_ZLB.mod for an example. You need to use the unstable version for this
------------
Johannes Pfeifer
University of Cologne
https://sites.google.com/site/pfeiferecon/
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