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I'm looking at the model proposed in Hansen2020. The not linearized model features a shock equation looking like this: $A_t = \bar{A}*e^{\epsilon_t}$ , where $\bar{A}$ is the steady state of $A_t$ and $\epsilon_t$ the exogenous variable.

I don't understand how a shock equation like this can determine the models steady state, since in the steady state the equation just becomes 1=1. If I run the model in Dynare I can find a steady state for whatever value of A I choose (which makes sense to me, cause it's not determined). Now for A=1 the steady state makes the most sense, but I can't see how this is determined and also I'm not able to replicate the authors results when choosing A=1.

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  • $\begingroup$ I think now this means $\bar{A}$ is just a parameter determined by the authors'. It is called that way, because it is always equals to the steady state of A. However, they don't report it in the calibration section. Is this just a mistake, or is there a common practice in such cases, I don't know about? $\endgroup$ Jan 17, 2023 at 17:36

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