sorry to bother again on this topic, but I am really struggling with it.
I am currently working on a Ramsey problem with two instruments. I’ve tried a different approach to obtain the Ramsey steady state.
Approach 1: until today, I was writing in the “steady state model” section of the mod file the equations that I used to compute the decentralised economy solution (that, is the model without Ramsey).
Unfortunately, with this approach, I lately discovered that the Planner changes some of the parameters (due to the fact that their values are found through the calibration process of the steady state derivation).
Approach 2: so, I changed approach (mod file attached) and I tried to directly write in the “steady state model” the steady state values of the decentralised economy of my variables (i.e., without the analytical equations I used to compute them). NB : for the variables which have a direct relation with the two instruments I wrote the analytical equation, as before.
Yet, I am wondering that with this approach I am not explicitly defining the direct relations some variables may have with the instruments, i.e. a variable directly influenced by the instruments may affect others in a recursive way.
I also have in mind another possible approach (approach 3): I give the model the analytical equations (same as the decentralised economy) for the SS, BUT I also give all the the values of the parameters (so that no parameter would be found through calibration and so not modified by the Planner’s SS computation) .
Which approach do you think is the correct one?
Thank you really much for your help and your patience,
Have a nice day!
forum_new_approach_ss.mod (7.0 KB)