Did you mean to say, “If you don’t make sure the \bar{ \pi} moves with the change in the inflation rate…”? Because \bar{ \pi} is already the target, yeah? And thus, your reply sounds like, “if you don’t make sure the target moves with a change in the target…”
So what I have in my model is something like this. Everything is the same in the initial
and endval
sections, except target
and steady-state inflation rate (inflation_rate
). The model is non-linear.
var Y C ...;
varexo target;
parameters alpha beta ...;
model;
initval;
target = exp(0.08/4);
inflation_rate = exp(0.08/4);
Y = some expression;
C = some expression;
endval;
target = exp(0.04/4);
inflation_rate = exp(0.04/4);
Y = some expression;
C = some expression;
Y,C
here are real variables. I will investigate why the discrepancy occurs in my model. But can you confirm this statement (to make sure I understand correctly)…
“Even in a non-linear model, a non-zero inflation rate has no effect on real variables in steady-state unless there is some sort of incomplete indexation in the model.”