"product of two variables" type welfare loss function

Dear all,

Please provide me an insight on dynare coding problem. I’m doing an optimal fiscal and monetary policy thing with Ramsey policy problem, and my welfare loss function seems a linear quadratic but includes one term that is represented as a product of two different variables, such as a product of output gap and government spending gap, like “yg". In simple dynare code for optimal policy rule in general case, we can simply use osr_params, but if i put the special case, like "yg” the dynare doesn’t work well. I know in “optim_weights” term every variables should be put as non quadratic term, but I still don’t know how to input “y*g” type quadratic term in the dynare code.


The specification of the loss function is done with osr_weights and not osr_params.

If you want to include cross products, you should write something like

inflation 1;
y 1;
inflation, y 0.1;



I really appreciate for your help, Michel.