time varying mark up

[jngv]

Dear Doctor Pfeifer

I am a Beginner at Dynare and I would like to write the price setting equation with time varying mark up using exp notation. With constant price mark up( theta_p ), the price setting with positive trend inflation (pi) and indexation (gammap) can be written in the following recursive way:


% (1)Reset price
exp(pr) = (1+theta_p)*exp(g1)/exp(g2));

% (2) Auxiliary g1
exp(g1) = exp(lam)*exp(mc)*exp(y) + xip*beta*(exp(pi)^(gammap)/exp(pi(+1)))^(-(1+1/theta_p))*exp(g1(+1));

% (3) Auxiliary g2
exp(g2) = exp(lam)*exp(y) + xip*beta*(exp(pi)^(gammap)/exp(pi(+1)))^(- 1/theta_p)*exp(g2(+1));

But I don't know how to write the same set of equation when I have mark up that follow, for example, an AR(1)process such ln(theta_p)=(1-rho)*ln(theta_pp_ss)+ rho* (ln(theta_p(-1))+eps.


Should I write exp(theta_p) or theta_p?

Thank you in advance for your help.

[jpfeifer]

See http://www.dynare.org/phpBB3/viewtopic.php?f=1&t=3087. With a time-varying markups, there is no recursive representation as far as I know.

[jngv]

Thank you very much Professor.