Helllo everyone,
I am writing about the implementation of inequality constraints in Dynare within a deterministic simulation.
In particular I am referring to an example of irreversible investment (e.g i>=0) I found in some notes from Prof. Villemot here: dynare.org/DynareShanghai201 … nistic.pdf
(see pag. 37)
I attach below the relative Dynare code from Villemot which can be found here: github.com/DynareTeam/dynare/issues/439
There are few questions about it I would like to ask:
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I was not able to find any detailed documentation about inequality constraints in Dynare within deterministic simulation. Is there any reference you can suggest me?
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In the page where the code is, it is mentioned about a bug when the simulation is implemented with bytecode+block.
I was wondering if this problem has been fully solved. And, more importantly, if the implementation of inequality constraints in Dynare is well-tested and reliable. -
While simulating Villemot code, I realised that it produces an error when replacing the condition on investments (i>=0 and i<0) with a condition on the multiplier associated with its non-negativity constraint (mu==0 and mu>0). From the perspective of the slackness conditions, shouldn’t they be equivalent? I don’t understand then why the second one doesn’t work.
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Also, I futher notice that the error at point 3) disappears when changing the solver algorithm (e.g it works with stack_solve_algo=2). In this case the results produced are the same under either (mu==0 and mu>0) or (i>=0 and i<0) .
Thank you very much for your time.
VillemotCode2.mod (2.01 KB)