Calender-based regime switch estimation


#1

Hello,

I would like to ask how I can estimate models with calender-based regime switch in policy. Say, central banks set the nominal interest rate according to Taylor rule during period T0-T20, while during periods T21-T40, the taylor rule will be suspended, with r set to the exogneous level. After T40, the taylor rule is opperative again.

Is that possible with Dynare?

Thank you


#2

Without knowing more details, it is impossible to answer. Are you talking about a regime-switching DSGE model? Or is this a one-time switch in the regime that is either perfectly known or a complete surprise with people not expecting futher regime changes?


#3

it’s a DSGE model, in consideration of regime switch, which has resulted in two seperage models. (crisis and non-crisis)
non-crisis part: when the interest is above the threshold, the central bank sets the interest rate accorrding to taylor rule, the monetary base is a function of credit premium;

crisis part: when the interest rate falls below the threhold, the interest rate is set fixed at the threshhold, but the monetary base is a function of broad money supply.

my question is: 1.is it possible to estimate threshold based regime switch with dynare?
2. is it possible to estimate calender based regime switch with dynare?

Thanks in advance!


#4

Dynare is not well-suited for that type of estimation exercise. You should have a look at Junior Maih’s RISE toolbox: https://github.com/jmaih/RISE_toolbox