Inequality constraints

Dynare help (legacy posts)
1

Dear all,

I need a help to handle inequality constraints (like x(t)<=1) in Dynare. I was thinking of adding Lagrange multipliers (lamda(t)) and then apply the usual khun-Tucker condition ((1-x(t))*lamda(t)=0) but still I have to make sure that the multiplier lamda(t) is positive for all t. How do I manage this?

Thanks!

2

You cannot.

What about to penalize utility or profits of agents if the economy breaks the constraint?

Ondra K.

3

Thanks for your answer!

Do you have an idea of how to introduce (automatically) those penalties when writing down the model in the *.mod file for dynare?

Hope that you can help still.

4

You cannot do that automatically. Severity, shape and location of these penalties is your choice.

Ondra K.