Modeling Quantity Sanctions with OccBin?

Occbin
1

Hi all,

I’m working with a two-country model and exploring how to implement a quantity sanction on the Home economy. Specifically, I’m interested in restricting a variable like cF (e.g., imported consumption) to not exceed a certain upper bound.

I’m new to OccBin and was wondering if this kind of restriction—something like

if cF > upper_bound(cF), then cF = upper_bound(cF)

can be implemented as an occasionally binding constraint, or if there’s a more appropriate approach–particularly one that differ from Ghironi’s.

Has anyone implemented something similar, or could share insights on whether this setup is feasible within OccBin?

Many thanks in advance!

2

At first sight, this is a standard occasionally binding constraint problem like the zero lower bound on interest rates. If cF returns to be non-binding and a piecewise linear solution is sufficient, you can use OccBin.