Ramsey Optimal Policy

Dynare help (legacy posts)
1

Thanks Michel.

2

There are several problems with your *.mod file

  1. when you use ramsey_policy, you need to remove the policy rule, because it is the ramsey_policy procedure that computes an equivalent of the policy function
  2. because your model “lacks” now an equation, it doesn’t make sense to use the steady command. It is the ramsey_policy procedure that computes the steady state under optimal policy
  3. using the welfare definition creates problems when computing ramsey_policy
  4. instead of using initval, I use steady_state_model that computes analytically the steady state for a given value of R taken as instrument
  5. it is not always possible to use a different value of the planner discount factor and of private agents discount factor. In your example, it doesn’t work, at least not with the values that you had chosen.

I attach an example that works at least with the unstable version of Dynare

Best

Michel
Mymodel.mod (1.09 KB)