Consider the general algorithm to solving the model:
Loop over some variable(s) (e.g., r)
- solve HH problem
- find aggregates
- check if guesses of variable(s) = implied values
Call this loop the "outer loop" since the HH problem etc is solved within.
In this outer loop, you will need to guess:
- In the SS, r
- In the time path, r_path and BQ_path
To be clear, this differs from the guess of K or used in Chapter 2, 3, and 8. See that in Chap 4, with endogenous labor, one needs to guess r (or K/L). And in Chap 8, it's noted that bequests are needed to solve the HH problem, so you'll need to guess them over the time path (not necessary in the SS since you'll be able to find BQ as you find the b_sp1's in the HH problem solution).
Consider the general algorithm to solving the model:
Loop over some variable(s) (e.g., r)
Call this loop the "outer loop" since the HH problem etc is solved within.
In this outer loop, you will need to guess:
To be clear, this differs from the guess of K or used in Chapter 2, 3, and 8. See that in Chap 4, with endogenous labor, one needs to guess r (or K/L). And in Chap 8, it's noted that bequests are needed to solve the HH problem, so you'll need to guess them over the time path (not necessary in the SS since you'll be able to find BQ as you find the b_sp1's in the HH problem solution).