I’m working myself through all the Ramsey threads in the forum. Now, I found that somebody else also uploaded the .mod file from Karadi for the Gertler/Karadi (2011) model: Welfare comparison with Ramsey optimal policy
In that code, steady state values are just entered as numbers and not conditional on the instrument as in the ramsey_example.mod file you provide on github. And they are provided in the initval block not in the steady_state_model block. Furthermore in the ramsey_example from github, you only provide steady state values for the variables which are not the instrument. While in ramsey.mod in Welfare comparison with Ramsey optimal policy also for the instrument a value is provided.
So now I’m confused: “conditional on the instrument” means that if I have a steady state value for the instrument, I can just calculate all other steady state values. I do not have to enter them as functions of the instrument? So basically, when I have a running code with simple rules and now want to calculate optimal policy, I do not have to rewrite the entire steady_state_model block, but can just use the same values as before.
Now, I fixed my code (adaption of Karadi’s code) accordingly. When I now try to fine optimal conventional monetary policy, i.e., instrument is i and Taylor rule is commented out, everything runs through fine. However, when I try to calculate optimal unconventional policy, I get the the message that the BK conditions are not fullfilled. What could be the problem? attached the code. Same parameter file as above should be used with it.
FA_CP_new2.mod (9.9 KB)