Dear all,

I have some questions about Ramsey optimal policy.

My model is a standard model with habit formation consumption. It works fine if I put Taylor rule as the monetary policy rule. But there’s a problem when I try to get the results under Ramsey optimal policy. The planner objective is a function of consumption expenditure and labour hours which I wrote it s follows:

planner_objective log(c-h*c)-psi*(((wl^(lambdaw*(1+v)/(1-lambdaw)))*(w_star^(lambdaw*(1+v)/(1-lambdaw)))*(l_star^(1+v)))/(1+v));

ramsey_policy(planner_discount=0.9976,order = 1,instruments=®);

eliminare_lagrange_multipliers;

When I try to run the code, Dynare returns the following error message:

Error using dynare_solve (line 60)

An element of the Jacobian is not finite or NaN

Error in evaluate_steady_state (line 66)

[ys,check] = dynare_solve([M.fname '*static’],…
Error in steady* (line 54)

[steady_state,params,info] =

evaluate_steady_state(oo_.steady_state,M_,options_,oo_,~options_.steadystate.nocheck);

Error in steady (line 81)

[steady_state,M_.params,info] = steady_(M_,options_,oo_);

Error in Ikeda_main10_ramsey (line 822)

steady;

Error in dynare (line 180)

evalin(‘base’,fname) ;

I need help to solve the errors. Any help would be much appreciated!

Best Regards,

Sahar Bashiri