Loop over parameters to find maximized welfare

jpfeifer · September 13, 2018, 10:00am

@MichelleHuang wants to do a grid search here. I just want to point out for future reference that the conditional welfare measure mentioned in the two previous posts is not general. It is conditional welfare in the deterministic steady. If you want to compute conditional welfare in other points, you have to use the simult_-function as in

github.com

JohannesPfeifer/DSGE_mod/blob/master/Born_Pfeifer_2018/Welfare/get_consumption_equivalent_conditional_welfare.m

function outvalue=get_consumption_equivalent_conditional_welfare(par_value_lambda)
% function outvalue=get_consumption_equivalent_conditional_welfare(par_value_lambda)
% computes the conditional welfare difference between the given model equilibrium and the 
% alternative with a consumption-equivalent of lambda lost compared to the
% natural/flex-price allocation; it uses Dynare's simult_-function to compute the lifetime utility 
% defined in the model for a given state vector (here the steady state)

% Copyright (C) 2018 Johannes Pfeifer and Benjamin Born
%
% This is free software: you can redistribute it and/or modify
% it under the terms of the GNU General Public License as published by
% the Free Software Foundation, either version 3 of the License, or
% (at your option) any later version.
%
% It is distributed in the hope that it will be useful,
% but WITHOUT ANY WARRANTY; without even the implied warranty of
% MERCHANTABILITY or FITNESS FOR A PARTICULAR PURPOSE.  See the
% GNU General Public License for more details.
%
% For a copy of the GNU General Public License,

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Now to the questions I did not yet answer above:

Iacoviello did only do a first order approximation as he did not conduct a welfare analysis. At first order, there is certainty equivalence so that he could multiply all shocks by 100. That is not allowed at second order. 1% is 0.01.
I don’t understand the question about stoppping. The code is designed to filter out error codes.
The code for displaying you pasted cannot work, because rho is not known. You want to have
num2str(rhogrid(i)).