OSR and Ramsey Welfare Comparison

Optimal Policy
1

Dear Prof Pfeifer

  1. As the Ramsey Steady State can differ from the steady state computed in standard model (interest rate is different for me), is it incorrect to compare the Ramsey model with the standard model using unconditional welfare?
  2. Can I use histval(0) and specify value of interest rate as the one computed from SS of the standard model and then compute conditional welfare and use the latter as the reference regime?
  3. Can I use the procedure mentioned in Questions on Ramsey welfare in Dynare 4.7 - #7 by jpfeifer to compare Ramsey (benchmark) and an alternative policy?
2
  1. That depends on what your object of interest is. Conditional and unconditional welfare simply answer different questions.
  2. No, that does not work, because the interest rate is (typically) not a state variable. You would need to provide a full state vector to evaluate conditional welfare.
  3. What exactly are you trying to do?