Hello, I am sorry if my question is somewhat trivial, but I am doing my master’s and am new to dynare especially to problems minimizing a loss function of a planner. In the screenshot I provide my exercise (1 and 2 are the standard IS and NK Phillips Curve)
Here is my approach:
// Inflation Forecasting and Monetary Policy
// Practice Session 2
// https://www.dynare.org/manual/the-model-file.html#occasionally-binding-constraints-occbin
// List of variables
var
x ihat pi
y i
rn upsilon vartheta;
varexo
e_r e_upsilon e_vartheta;
// List of parameters
parameters
sigma kappa beta phi_i phi_pi phi_y theta
pitarget iss rss yss
rho_r rho_upsilon rho_vartheta sigma_r sigma_upsilon sigma_vartheta;
// Calibration
sigma = 0.5;
kappa = 0.02;
beta = 0.99;
phi_i = 0.9;
phi_pi = 1.5;
phi_y = 0.5;
theta = 7.66;
pitarget = 0.005;
rho_r = 0.85;
rho_upsilon = 0.5;
rho_vartheta = 0.3;
sigma_r = -1;
sigma_upsilon = 0.005;
sigma_vartheta = 0.002;
rss = 0.0025;
iss = pitarget + rss;
yss = 0;
model;
x = y - yss;
ihat = log(1+i) - log(1+iss);
x = x(+1) - sigma\*(ihat - (pi(+1)-pitarget) - rn); // AD
pi - pitarget = kappa\*x + upsilon + beta\*(pi(+1)-pitarget); // AS
rn = rho_r\*rn(-1) + sigma_r\*e_r;
upsilon = rho_upsilon\*upsilon(-1) + sigma_upsilon\*e_upsilon;
vartheta = rho_vartheta\*vartheta(-1) + sigma_vartheta\*e_vartheta;
end;
planner_objective y^2 + (theta/kappa)\*(pi - pitarget)^2;
ramsey_model(planner_discount=beta, instruments=(i));
ramsey_constraints;
i >= 0;
end;
shocks;
var e_r; stderr 6;
end;
stoch_simul(order=1,irf=20) y pi i rn;
evaluate_planner_objective;
=> My problem: dynare seems to ignore the ZLB I tried to impose in ramsey_constraints; when I look at the IRF’s I see that the variable i goes to -6 and this would not work with a ZLB. I have solved another exercise with occbin but there I am confused how I would implement this in combination with a ramsey model. Does somebody see the issue?