Robot_ramsey2.mod (16.0 KB)
Robot_rule1a.mod (14.0 KB)
Dear professor,
I am doing a two-area model.I make a second order approximation of welfare like Engel (2011,AER).Usually we expect that the sign of welfare loss (I have taken the opposite of welfare gains) is positive. However, my welfare loss is negative, I have check the model many times. I wonder whether this is correct?Besides, another strange question is that the welfare loss of Ramsey model is larger than the monetary rule. As we know, Ramsey model minimizes the welfare loss. It is so strange.Could you have a look and help me to figure out it? Thanks professor.
How did you compute the welfare loss? I am seeing a big formula that may contain mistakes.
I use the linear-quadratic framework like Engel (2011.AER) to compute the welfare loss.My model includes capital and artificial intelligence, so it may be different from previous study. what’s the mistakes that you find?
I did not find mistakes. All I am saying is that such manual approximations are error-prone and you need to thoroughly check for mistakes.