Planner_objective_value in ramsey policy

Dynare help (legacy posts)
1

I have a quick question on the planner_objective_value generated by the ramsey_policy command. Dynare generates two values of the planner objective function:

  • one with initial Lagrange multipliers set to 0
  • the other with initial Lagrange multipliers set to steady state
    I wonder which value should I use if I want to compare the welfare under ramsey policy to the welfare under a simple rule?

Besides, I also wonder should the welfare under ramsey policy always be higher than the welfare under a simple rule, if everything equal?

Thanks a lot.

2

I would say you should use the one in steady state, because the OSR welfare will also give you a welfare measure computed around steady state.
I think welfare under Ramsey policy should always be higher than the welfare under a simple rule, because the former is fully state contingent, i.e. can react to all states. The OSR in contrast restricts the policy to responding to the particular variables you specify.