The Asset Approach, Dynare, and Computational Steady States
Graded Homework Problems
Francisco E. Ilabaca, Ph.D. Johns
1. Consider the following planning problem (all non-price variables are normalized by the aggregate population), where all notation is standard:
such that
ct = yt
and
In addition,Add
where
(a) a) Set up the current value Lagrangian using a single constraint.
(b) Derive the first-order conditions. Please show your work.
(c) Solve for the steady state values of c,n,z. Please show your work.
(d) d) Create a Dynare .mod file called RBC2 that simulates the model in the previous problem for 1,065 periods assuming the following parameter values: ε = 4,α = 2/3,γ = 0.0897. You should estimate the parameters Z,χ,ρ,η¯ ξ2 using Stata and the data provided in the Excel file called ”HW6Data”. As usual, all non-price variables should be normalized by the aggregate population in accordance with the model’s statement.
1
2. Following as an example the development in this Lesson, create a Matlab .m file called CONTROL HW6.m and a Matlab function called MODEL HW6.m that solve computationally problems 8.b. ad 8.c from the practice problems with solutions from Lesson 1, under the following parameter assumptions: It = 100,pc,t = 1,pg,t = 2,α =
0.5,β = 0.5
(a) Canada’s interest rate increases.
(a) Investors in the market anticipate an appreciation in the peso.
(a) Mexico’s interest rate decreases.
(a) Canada and Mexico decrease interest rates by the same amount.
Add
2
