I am trying to use the “discretionary policy” routine in Dynare 4.3.0. But although the manual says that I can specify a non-linear policy objective, when trying to run it I receive a message that "discretionary_policy solves only linear_quadratic problems"

Any help would be much appreciated.

Sorry, the manual is misleading. The discretionary_policy command solves only linear-quadratic problems.

All the best,

Michel

Also note that discretionary_policy won’t work if you don’t specify the “linear” option to the “model” block. We forgot to document this; it will be fixed in future releases.

To be yet more explicit, discretionary_policy in Dynare works correctly only if

- the equations in the model are linear,
- the option linear is used in the model statement
- the objective function is purely quadratic (I’m not sure that this last condition is correctly tested by Dynare)

Best

Michel