Dear dynare team,

Iam working on the hybrid nkm with a mix of rational expectations and bounded rationality.

Iam following the approach of Brocks/Hommes.

My PC looks like:

pi= gamma_f* pi(+1) +gamma_b*(alpha)^2* pi(-1) +k* x+vt

instead of

pi= gamma_f* pi(+1) +gamma_b* pi(+1) + k*x +vt

alpha^2 is the bounded rationality partameter

In the next step I set

alpha =0 for stationary expectations

gamma_f =0 and

gamma_b=1

so it seems to be a purely backward-looking pc but through the alpha=0 the forward and backward looking part of the pc is 0 and just k*x+vt remains.

Dynare gives me a loss of 1, 28… but I think the loss needs to be zero in commitment?

We just have a contemporaneous variable in the pc.

And in this case my OSR Loss is bigger than in discretion and commitment. How can it be?