\textsf{\textbf{NOTE!}} As mentioned earlier, we need to instruct Dynare to log-linearize our model, since it contains non-linear equations in non-stationary variables. A simple linearization would fail as these variables do not have a steady state. Fortunately, taking the log of the equations involving non-stationary variables does the job of linearizing them.\\
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@@ -234,19 +234,19 @@ We have seen each part of the .mod separately; it's now time to get a picture of
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\texttt{var m P c e W R k d n l Y\_obs P\_obs y dA; \\
This should not come as a surprise. Dynare must know which variables are observable for the estimation procedure. \textsf{\textbf{NOTE!}} These variables must be available in the data file, as explained in section \ref{sec:estimate} below. For the moment, we write:\\
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\texttt{varobs Y;}\\
\texttt{varobs y;}\\
\section{Specifying the steady state}\label{sec:ssest}
Before Dynare estimates a model, it first linearizes it around a steady state. Thus, a steady state must exist for the model and although Dynare can calculate it, we must give it a hand by declaring approximate values for the steady state. This is just as explained in details and according to the same syntax outlined in chapter \ref{ch:solbase}, covering the \texttt{initval}, \texttt{steady} and \texttt{check} commands. In fact, as this chapter uses the same model as that outlined in chapter \ref{ch:solbase}, the steady state block will look exactly the same.\\
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@@ -138,7 +138,8 @@ displayed). Actually seeing if the various blocks of Metropolis-Hastings runs co
Finally, coming back to our example, we could choose a standard option:\\
