Conditional welfare and steady state consumption

Dynare help (legacy posts)
1

Hello everyone,

After I get all the optimal policy coefficients and say I find the monetary policy regime associated with the highest welfare, and assume that the welfare loss function = 200. How do I present the result in my paper? I noticed that most paper use the welfare as percentage to steady state consumption. I dont understand how to present my results in a similar manner. Can anyone please explain the way most papers follow? Thanks!

2

Please take a look at Section “3.2 Measuring Welfare Costs” of Schmitt-Grohe/Uribe (2006): “Optimal simple and implementable monetary and fiscal rules: expanded version” at nber.org/papers/w12402
Essentially, you compute the fraction of consumption that you need to take away in steady state to yield the same utility.