Dear community,

iam working with the above mentioned paper. The authors have compared the gains of commitment over discretion and how heterogenous beliefs affect the gains. They said that " a larger share of non-rational agents involves higher welfare losses…, since the effects of the shocks become more persistence."

They also explained the persistece effect and dispersion effect as reason for the statement above.

The model in the paper contains the hybrid PC.

My question is now:

I simulated the hybrid NKM with bounded rationality. I used alpha as the bounded rationality paramter. In my simulations alpha has the following values: 1, 0.5, 0 and 1.01.

When I compared my results to Bartolomeo et al. I have determined that my loss values do not agree with this statememt. In my case it is as follows: a larger share of non-rational agents involves smaller welfare losses. I get this result in all my 4 simulations. I checked my results , because I was unsure if Iam wrong maybe.