Hi, can someone help me with writing the FOCs containing function (and its first derivative) of some variable to dynare? My problem looks like https://drive.google.com/file/d/0B0x5lJ4KqF6FUlV3T3FDYVBma1k/view?usp=sharing.
How to cope with those delta(u) and delta' ?
Thank you very much.
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How to write function and its derivative in FOC
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How to write function and its derivative in FOC
by mip » Fri Aug 28, 2015 9:25 am
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Re: How to write function and its derivative in FOC
by jpfeifer » Sun Aug 30, 2015 2:23 pm
Simply assume a functional form for delta(u). Because the model will be solved by perturbation, all that matters are the derivatives at first and second order. See for example equation (9) of Born et al (2013): Fiscal news and macroeconomic volatility, Journal of Economic Dynamics & Control 37, 2582–2601
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