In the paper: SGU2006, Optimal Simple and Implementable Monetary and Fiscal Rules: Expanded Version (snapshot above), the welfare comparison is based on the premise that “the non-stochastic steady state is the same across all policy regimes”.
Is this equivalent to say that: if I introduce a policy instrument into the model, but some steady states of the model are therefore changed, then initial states of different policy regimes are no longer the same. Welfare comparison conditional on the initial state is invalid??
If the answer is “yes, equivalent”, can I still compare the welfare by unconditional indicators, for example,
oo_.mean(welf) ? I saw many papers just compare various scenarios in a very “natural” way, but when I do it by myself, I guess this may be a problem.
Sorry for my stupid question.