Dear Dynare team,

I am using the “osr” command to replicate the optimal simple rule (TR1) in Huang and Liu (JME, 2005), which features a closed-economy two-stage New Keynesian model. The osr command can be run successfully, but cannot reproduce the results as shown in Table 3 in the paper. Especially, the estimated coefficients are not stable with different choices of initial values of the coefficients in Taylor rules. How can I fix the problem?

Just for reference, in writing the mod file, I am strictly following the definition of optimal monetary policy problem as specified at the beginning of Section 5 in the paper.

Attached are my mod file, and the paper.

Thanks!

Oliver

TaylorRule_HuangLiu.mod (1.3 KB)

Huang and Liu_2005_JME_Inflation targeting, what inflation rate to target.pdf (310.4 KB)