Dear jpeifer,
I have got conflicting answers throughout this board on the first question and the second is related. I would very much appreciate your clarification:
- Some documentation says that Ramsey Optimal Policy can be done in a linearized model entered into Dynare (with y^2 + pi^2 as the objective function instead of u(c,l): dynare.org/DynareWiki/OptimalPolicy and Simple Optimal Monetary Rules
But you have said before that the model should be non-linear - this is because the problems calls for a second-order Taylor approximation instead of first. Here one can enter u(c,l) and non-linear constraints and Dynare will take the 2-order TA.
- So, can you clarify if the objective function: y^2 + pi^2 in a linear Dynare model can also be used to give Ramsey optimal policy predictions (as compared to the objective function u(c,l) in a non-linear model)? This seems to be claimed in the documentation linked to.
- The following code, entered into Dynare ++ (open economy New Keynesian model with two sectors demanding labour) does not work. This is another attempt to compute Ramsey policy. Is it a problem with the syntax or a more structural issue? Is there an example .mod Dynare++ file for an open economy that you can provide.
Thank you!
Ana
var Y NY C Q CH N NR prf;
varexo eps_prf ;
parameters alpha alphaR phi rho beta ;
alpha = 0.4 ;
alphaR = 0.4 ;
phi = 3 ;
who = 0.8 ;
beta = 0.99 ;
planner_objective Ln© + N^(1-phi)/(1-phi);
planner_discount beta;
model;
C = Q ;
N = NR + NY ;
NR = (1-alphaR)prfQ^(1/*1-alpha)) ;
NY = Y ;
Y = CH ;
CH = (1-alpha)CQ^(1/1-alpha)) ;
prf = rhoprf(-1) + eps_prf ;
end;
initval;
prf = 0 ;
NR = 0 ;
Q = 1;
C = 1;
CH = (1-alpha) ;
Y = (1-alpha) ;
NY = (1-alpha) ;
N = (1-alpha) ;
order = 2;
vcov =
0.01
];