Hi, my question is whether it is possible to set the value of my instrument in optimal policy exercise for several periods. To be more concrete, imagine I want to do a Ramsey policy and as an instrument I have interest rate (R). I want for the periods 1:10 set R = 1 how can I do it?
But if you set R=1, then the policy is no longer optimal, yeah? Or do you mean after obtaining the optimal policy, you want to simulate data where R=1 for periods 1:10?
Can I set for first ten periods R = 1 and then let Dynare solve the model using ramsey policy?
So like the value for R is not optimal for the first 10 periods, and then after that, it is optimal? Not sure it is possible in dynare…according to my current knowledge of the software.
You can use the initval command to set the starting poinr of your simulation (R = 1). This is not exactly what you want to do, but is a good starting point.
This would not easily work. Essentially, there is a regime transition/structural break.
I want to do something like this, here the model is solved with Ramsey planner and authors argue the effects of don’t increasing nominal interest rate for some periods (red line).
Source: Inflation Targeting Under Imperfect Policy Credibility (2009 IMF working paper)
I had a look at the paper, but the authors do not provide sufficient information on what exercise they are actually conducting.