Help in Results of Optimal Policy

Optimal Policy
1

Dear Users,

I have a strong confusion (after checked the manual for dynare 4.6.4) with respect to the results given by Dynare with respect to the commands for the optimal policy function and I need yout help.
In particular

  1. When I use only the planner_objective and ramsey_model command what results do I get and how are they displayed? it gives me somewhere the optimal values for variables or parameters?

  2. When I insert evaluate_planner_objective I get numeric values by setting 1) the lagrange multipliers = 0, 2) the lagrange multipliers in steady state. What do those numerical results of the planner objective indicate? are they welfare losses? (with some welfare measure i can obtain in fact negative values) or are the values of the objective function maximized (with other objective function I obtain positive ones)

  3. is it possible that they are equal in both the lagrange=0 and lagrange=SS cases (would it mean that my lagrange multiplier are 0 in steady state and so basically it is like I have an unconstrained maximization?)

My best
Thank you all for any help

2
  1. Ramsey is a fully state contingent optimal policy. It’s not a simple rule where you would have coefficients. Rather, the decision rules (and the IRFs) embed the optimal behavior.
  2. These are the values of the planner objective you specify. Often, these functions correspond to life-time utility and therefore have an ordinal ranking. For example, log utility with a consumption value below 1 will result in a negative number.
  3. My hunch is that this could be possible.
3 Likes
3

Thank You very Much Professor,
very clear as always
My best