From 4ad5b3080ede8f53916f80da8570d6cc3656c1d1 Mon Sep 17 00:00:00 2001
From: Johannes Pfeifer <jpfeifer@gmx.de>
Date: Tue, 17 May 2022 11:52:18 +0200
Subject: [PATCH] occbin: clarify concept of baseline regime
(cherry picked from commit aeac54bd1516590e0669d34b60e70c2f8397e842)
---
doc/manual/source/the-model-file.rst | 12 +++++++++---
1 file changed, 9 insertions(+), 3 deletions(-)
diff --git a/doc/manual/source/the-model-file.rst b/doc/manual/source/the-model-file.rst
index 86a8a72e37..107a91c527 100644
--- a/doc/manual/source/the-model-file.rst
+++ b/doc/manual/source/the-model-file.rst
@@ -4733,16 +4733,22 @@ All of these elements are discussed in the following.
``STRING`` is the name of constraint that is used to reference the constraint in ``relax/bind``
equation-tags to identify the respective regime (see below). The ``bind``-expresssion is mandatory and defines
- a logical condition that is evaluated in the baseline (non-binding) regime to check whether the
+ a logical condition that is evaluated in the baseline/steady state regime to check whether the specified
constraint becomes binding. In contrast, the ``relax``-expression is optional and specifies a
logical condition that is evaluated in the binding regime to check whether the regime returns
- to the baseline non-binding state. If not specified, Dynare will simply check in the binding
+ to the baseline/steady state regime. If not specified, Dynare will simply check in the binding
regime whether the ``bind``-expression evaluates to false. However, there are cases
where the ``bind``-expression cannot be evaluated in the binding regime(s), because
the variables involved are constant by definition so that e.g. the value of the Lagrange
multiplier on the complementary slackness condition needs to be checked. In these cases,
it is necessary to provide an explicit condition that can be evaluated in the binding
- regime that allows to check whether it should be left.
+ regime that allows to check whether it should be left.
+
+ Note that the baseline regime denotes the steady state of the model where the economy will
+ settle in the long-run without shocks. For that matter, it may be one where e.g. a borrowing
+ constraint is binding. In that type of setup, the ``bind``-condition is used to specify the
+ condition when this borrowing constraint becomes non-binding so that the alternative regime
+ is entered.
Three things are important to keep in mind when specifying the expressions.
First, feasible expressions may only contain contemporaneous endogenous variables.
--
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