- No, that is not a requirement. Woodford’s example just happened to be linear. The
command will instruct Dynare to take construct the Lagrangian for the planner’s problem and construct the FOC’s. This will result in a nonlinear model. Now it is up to you how to solve this. Either with perturbation or with the perfect foresight solver as is done here.
- The
actually is redundant here, because
automatically sets it. It simply indicates to subsequent Dynare commands that we are dealing with a Ramsey problem. I updated the mod-file.