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  • Jun 8, 2013, 04:33 AM
    alex1023
    Neoclassical Model
    Hi, I am facing the following problem in the context of the neoclassical model of Baxter/King (1993). And I am struggling including the taxes at the right places. Here is my Dynare code:

    // Fiscal Policy in General Equilibrium

    //Benchmark Model with Basic Government Purchases
    // Variables
    var c,y,I,k,l,n,g,lb,w,tr;
    varexo gb;

    // Parameters
    parameters r, q, beta,delta,thetal,thetan,thetak,sg,tau,nss,lss,trs s,yss,gss,iss,css,kss,lbss,wss;

    // Predetermined Variables
    predetermined_variables k;

    // Parametrization
    r=0.065;
    thetak=0.42;
    thetan=0.58;
    delta=0.1;
    beta=0.939;
    tauss=0.2;
    tau=tauss;
    sg=0.2;
    nss=0.2;
    lss=0.8;
    trss=0;
    q=r+delta;

    //Steady State

    koy=thetak/((1-tau)*q);
    ioy=delta*thetak/((1-tau)*q);
    coy=1-ioy-sg;
    yss=(koy^(thetak/(1-thetak))*nss^(thetan/(1-thetak)));
    gss=sg*yss;
    iss=ioy*yss;
    css=coy*yss;
    kss=koy*yss;
    lbss=1/css;
    wss=thetan*yss/nss;
    thetal=lbss*(1-tauss)*wss*lss;

    model;
    1/c=lb; // Marginal Utility
    w=thetan*y/n; // Wage Equation
    thetal/l=lb*(1-tau)*thetan*y/n; // Marginal Product of Labour
    lb=beta*lb(+1)*((1-tau(+1))*(thetak*y(+1)/k(+1))+1-delta); // Euler Equation
    y=k^thetak*n^thetan; // Production Funcion
    y=c+i+g; // Income Identity
    g=gb; // Government Expenditure
    k(+1)=(1-delta)*k+i; // Private Capital
    l+n=1; // Leisure/Labour Relationship
    tau*y=g+tr;
    end;

    initval;
    tr=trss;
    gb=gss;
    g=gss;
    y=yss;
    c=css;
    I=iss;
    k=kss;
    lb=lbss;
    n=nss;
    l=lss;
    w=wss;
    end;

    steady;
    check;

    // Permanent Shock
    endval;
    gb=0.01*yss+gss;
    end;

    steady;
    check;

    simul(periods=50);

    Thank you very much in advance!

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