Hello all,

I hope you can help me. I am starting a new project and I am trying to write a code where the monetary policy

reacts only after (or before) a number of periods of a technological change (or announcement of a change).

I don’t know where to look and I have been surfing for a while, hopefully someone has an idea or

paper (code) that I can look at.

Best,

Fernando

What exactly is the issue? Writing down a monetary policy reaction function that only reacts to output with a lag is straightforward. You could have a Taylor rule of the form

```
i=phi_pi*pi(-4)+phi_y*y(-4)
```

Thank you very much. I do want to keep constant the monetary policy after 3 periods from the productivity shock.

In case I use what you propose, in time 2 the monetary policy is:

i(3)=phi_pi*pi+phi_y*y;

but my concern is that this interest rate is based on -pi- and -y- from two periods before instead of being set

by current information on -pi- and -y-.

So I want, (ss) as the steady state:

i(1) = i(ss);

i(2) = i(ss);

i(3) = phi_pi*pi(3)+phi_y*y(3) ; and so on…

Thank you for the help.

Fernando

So essentially, you want an interest rate peg for two periods and the reverting to the standard monetary policy rule. This will be tricky and can only work in the context of perfect foresight simulations.

Yes, I want an interest rate peg, I found more or less a way to do it, I am trying now.

Why would it that work only in the case of perfect foresight?

Best,

Fernando

My hunch is that this setup introduces a time-dependence of the decision rules that make a pure recursive, time-invariant formulation of the model impossible. But maybe you have found a way around this.

Thank you very much, I will stick to the perfect foresight simulation to understand

how my model performs firstly.

Best,

Fernando