Labor reform and search and matching model

General DSGE Modeling
1

Hi folks,
This is a rookie asking for some help here…
I’m trying to gauge the impacts of a labor market reform on unemployment, using a dsge with search and matching frictions. The way a see this, it would go through the parameters of the model (adjustment costs, bargaining power…). That is, the reform would change permanently the deep structure of the economy. So, my questions are:

  1. is it possibly to simulate in Dynare the endogenous variables path from one steady state to another, following the change in the key parameters? How to do so?
  2. in case that the previous approach is not appropriate, what should I do? Perharps treat the parameters of interest as exogenous variables, assign them init and envalues and simulate the path in a deterministic way?
    Thanks a lot!
2

Hi,

You can simulate a transition from a steady state to another one in a perfect foresight model using the blocks initval and endval with the command steady before the simul command (or better the perfect_foresight_setup and perfect_foresight_solver commands). Look for initval and endval in the reference manual. Examples are available in these slides.

Best,
Stéphane.

3

Thank you stepan-a.
Let me bother you once again: that means, then, that I should go for the second approach, right?

4

Sorry. No, the first one.
Stéphane.

1 Like
5

Sorry again, I didn’t read your second point to the end. Yes it would be a deterministic model. I do not think you have to change a parameter into an exogenous variable, you can change the value of the parameter(s) just before the initval/enval blocks followed by steady.

Best,
Stéphane.

6

Great, Stéphane, many thanks!