Hello, I’m trying to solve an Open Economy model with optimal Ramsey policy.
I want to compare cooperative versus strategic schemes. For that, there are cases where I
have more than one planner objective function (one per country each with its instrument).
Can I have multiple planner functions and solve the model? and if so, how should I state it?.
I was declaring the functions as follows:
//Nash // Objective function and discount factor //home planner_objective C^(1-eta)/(1-eta) + a*G^(1-phi)/(1-phi) ; ramsey_model(instruments=(TAU), planner_discount=beta); //foreign planner_objective Cf^(1-eta)/(1-eta) + a*Gf^(1-phi)/(1-phi) ; ramsey_model(instruments=(TAUf), planner_discount=beta);
However, I’m not getting a solution, just an error. (Error using print_info (line 54)
One of the eigenvalues is close to 0/0 (the absolute value of numerator and
denominator is smaller than 1e-06!)
On the other hand, the Cooperative case runs without problem:
//Coop: planner_objective 1/2*(C^(1-eta)/(1-eta) + a*G^(1-phi)/(1-phi)) + 1/2 * (Cf^(1-eta)/(1-eta) + a*Gf^(1-phi)/(1-phi)) ; ramsey_model(instruments=(TAU, TAUf), planner_discount=beta);
Thanks in advance for any reply!
_*this model is just a trivial extension of the closed econ in which I’m just adding the foreign variables and assuming autarky. It’s not the actual one I wanna compare _
Nash vs. Cooperation but I want to have a working knowledge of the solution method (even if it’s qualitatively purposeless in this cae) in dynare before implementing an actual open econ model with cross country externalities.
example_ramsey_open_attempt.mod (2.3 KB)