timing conventions

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timing conventions

Hi all,
I am running a simple model and I have two questions.

1. What is the difference between stating

A = p ; and / or A(+1) = p(+1) ;

I know one means it holds at any time, and the other hold at expectation. Beyond that what does it really mean? can I use either one if both work ?

2. The equation above expressed at (t+1) is the FIRST FOC from a maximization problem. The SECOND FOC is

A(+1) = Z(+1);

The question now is can I use the FIRST FOC hold at (t) and the SECOND FOC hold at (t+1) ?? ...as:

[1] A=p;
[2] A(+1)=Z(+1);

would I be violating any rules by doing so ?
Ps. ( The reason I do so is that using both at (t+1) in a separate context the BK conditions fail ).
EEHH

Posts: 2
Joined: Sun Jun 11, 2017 11:39 am

Re: timing conventions

The first one means that the equation has to hold for every state of the world, while the second one means it only has to hold on average. That is a fundamental difference. Therefore you cannot use an arbitrary timing. There is a unique correct one you need to find. It is not valid to fudge the timing until the BK conditions are satisfied. As I said, there is one unique correct timing.
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Johannes Pfeifer
University of Cologne
jpfeifer

Posts: 6940
Joined: Sun Feb 21, 2010 4:02 pm
Location: Cologne, Germany

Re: timing conventions

I assumed so. thank you !
EEHH

Posts: 2
Joined: Sun Jun 11, 2017 11:39 am