Question Gili (2008) chapter2.mod

[binhpham]

Dear Prof. Johann,

I am a newbie in DSGE modelling. I read the model Chapter2.mod from JohannesPfeifer/DSGE_mod (Github) but I do not understand where the equation come from?

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//6. Monetary Policy Rule, eq. (22)
R=1/betta*Pi^phi_pi+eps_m;


Could you please explain to me? Because I read eq.22 in Gali book, I do not know where Betta come from!

[jpfeifer]

As it says in the header of my file

Note that this mod-file implements the non-linear first order conditions

The equation you refer to is the linearized one where the steady state drops out. In steady state, the implemented equation just tells you that

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R_ss=1/betta

[binhpham]

Thank you Prof. Johann but I am actually not so clear with the ideal.

Best!