Hello everyone,

I will appreciate if someone could help me because I am trying to use the consumption equivalent program from jpfeifer but I do not know how to apply it when I need to compare welfare in terms of consumption of two different .mod files.

Do I need to create a third .mod file so that I can compute the Welfare Gap between the other two models and then call the consumption_equivalent.m function?

In that case, how can I store and load in the third .mod file the dynamics of the two models?

Thank you very much!

# Consumption_equivalent. Welfare

Could you please elaborate. What exactly do you want to compare and how do the separate mod-files figure into this?

Sure. I have a model with 108 equations and 108 variables. I want to compare two different scenarios of the model that imply different dynamics for all variables (a scenario where macroprudential policy is implemented versus a scenario in which it is not). This is why I say that I have two mod-files, one for the no macroprudential model and the other one where macroprudential policy is introduced. I want to compare welfare in both scenarios… Also I have different ways of implementing macroprudential policy so in the end I have to compare all of them with the no macroprudential case that is my benchmark…

I got that. But you are trying to get a consumption equivalent. Equivalent to what? The steady state in each model? Or is one model the benchmark and you want to compute the consumption equivalent relative to that benchmark?

Yes, the no macroprudential policy is my benchmark and I am trying to get the consumption equivalent relative to that benchmark. That is, I want to know the welfare cost or gain of adopting macroprudential policy…

Just as in the paper " Optimal Simple and Implementable Monetary and Fiscal Rules" of SGU, I e define “lambda” as the fraction of No Macroprudential policy regime

consumption process that a household would be willing to give up to be as well off under

regime “Macroprudential” as under regime “No Macroprudential”.

Hello jpfeifer,

Could you see my reply? Could you tell me the way to do it?

The easiest way is to append the “No Macroprudential policy regime” economy as a separate economy to the mod-file and then compare the welfare. Similar to the way Smets/Wouters have a flex-price economy in their model, see https://github.com/JohannesPfeifer/DSGE_mod/blob/master/Smets_Wouters_2007/Smets_Wouters_2007_45.mod