In the extended steady state model, the log deviation of equity payout is initialized with the ratio of steady state dividend payout to steady state output. I understand it has to do with the way dyhat (log deviation of the equity payout) is defined in the extended model file. But I am unable to understand why the log deviation in equity payout is taken as a dividend yield(dividend to output ratio), not the log differences in the dividend yield from steady state ratio?
In the extended steady state model, the log deviation of equity payout is initialized with the ratio of steady state dividend payout to steady state output. I understand it has to do with the way dyhat (log deviation of the equity payout) is defined in the extended model file. But I am unable to understand why the log deviation in equity payout is taken as a dividend yield(dividend to output ratio), not the log differences in the dividend yield from steady state ratio?