Hi everyone,

I am currently working on a model where entrepreneurs are impatient compared to households so the two have different discount factors.

I want to solve for optimal monetary policy in this model?

Is it possible to solve for optimal monetary policy with two discount factors in DYNARE?

Monacelli (2005), “OPTIMAL MONETARY POLICY WITH COLLATERALIZED HOUSEHOLD DEBT AND BORROWING CONSTRAINTS” have a similar model where he uses Gauss to compute Ramsey solution. Planner maximizes the weighted sum of the discounted utility of the entrepreneurs and households. In the recursive lagrangian problem, the discount factor from the planner’s point of view is delta=(beta^w)*((gamma)^(1-w)) where w is the weight on the patient household’s utility and gamma= household’s discount factor and beta=borrower’s(entrepreneur) discount factor.

Based on the information in Monacelli (2005), is it possible to get Ramsey solution in Dynare?

Thanks for your help, in advance.

Elif.