Assignment #7 can be found here. Although it is a good idea to struggle with this assignment a little on your own, after you’ve worked on it a little you should look at the answers. The assignment involves working with the models in example #3 and #5 of the lecture notes on the log-linearization solution strategy.


The code for the RBC part of the assignment (i.e., example #3) is here. You should attempt to do the assignment by working with rbc.mod. The files, rbcans1.mod, rbcans2.mod and rbcans3.mod provide the answers to questions 1, 2, and 3 in the assignment.


The last question in the assignment works with example #5 in the lecture notes and the code you’ll need for that is here. The file, cggsignal.mod, provides answers.


You will need Dynare version 4. The Dynare code may be freely distributed, so you can use it without concern of copyright infringement. You may want to check out the Dynare website, though it is not necessary for this assignment. Some notes on the use of Dynare 4 can be found here.


You can put all the code in the same directory. You may want to deposit the Dynare code in a separate directory. In this case, when you work on the assignment, you should make sure that MATLAB is connected to the directory in which the assignment #7 software resides. You should identify the full address of the directory, xxx, where the Dynare code resides and then type





at the MATLAB command prompt. (You need to include the quotes in your command.)