# Plotting Policy Functions

Hi,

Im working on the following simple optimal growth model:
http://imageshack.us/a/img571/6075/cdpv.jpg
with the first-order conditions:
http://imageshack.us/a/img209/261/w1qc.jpg
The Dynare code is:

[code]%
%%%PREAMBLE%%%
%
var y invest k c z;
predetermined_variables k;
varexo eps;
parameters cbeta calpha crho ceta;

cbeta = .99;
calpha = .33;
crho = 0.9;
csigma = 0.035;
%
%%%MODELBLOCK%%%
%
model;
1/c = cbeta * 1/c(+1) * calpha * exp(z(+1)) * k(+1)^(calpha-1);
k(+1) = exp(z) * k^calpha - c;
z = crho*z(-1) + eps;
y = exp(z) * k^calpha;
invest = y - c;
end;
%
%%%INITIAL VALUE BLOCK%%%
%
initval;
k = 0.2;
c = 0.4;
z = 0;
end;
%
%%%SHOCKS%%%
%
shocks;
var eps = csigma^2;
end;

stoch_simul(periods = 2000,order=2, irf=40);

state_range=0:0.1:10;
state_name=‘k’;
plot_var_name=‘c’;
plot_policy_fun(state_name,state_range,plot_var_name);[/code]
For plotting the policy function I used the m-file by jpfeifer » Sat Mar 16, 2013 (attached)
My goal is to show the differences that occur between the policy functions using first and second order approximation due to certainty equivalence.
Yet I got really strange results. For the 2nd order approximation my policy function looks like
http://imageshack.us/a/img580/8256/xswe.jpg
and for my 1st order approx the policy function looks like
http://imageshack.us/a/img826/7357/bnim.jpg

Im very thankful for any help!
Best regards,
nbt
plot_policy_fun.m (3.39 KB)

Look at