Expected value of a power

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Re: Expected value of a power

Postby jpfeifer » Wed Dec 21, 2016 5:41 pm

Code: Select all
exp(-V(+1)/chi)/E_t[exp(-V(+1)/chi)]

again has the expectations around both expressions and is identical to 1.
You are not using a nonlinear transformation of the expectations themselves.
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Johannes Pfeifer
University of Cologne
https://sites.google.com/site/pfeiferecon/
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Re: Expected value of a power

Postby farukakbal » Wed Dec 21, 2016 5:59 pm

I believe i did the nonlinear transformation using the nonlinear function exp().
Code: Select all
EV = -(V(+1)/chi);

exp((-V(+1)/chi)-EV);

Does second line perform a nonlinear transformation right?

As a 2nd option i have written the expression at top as:
Code: Select all
(1 + (1/1)*(-V(+1)/chi-EV) + (1/2)*(-V(+1)/chi-EV)^2 + (1/6)*(-V(+1)/chi-EV)^3)

(which is actually a 3rd order approximtion around 0) so that i can solve the model with order=2. The IRFs are still same.
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