Two m files and two mod files

[littlemacro]

Hello Prof. Pfeifer,

I have some rudimentary doubts, after reading your github “Born_Pfeifer_2018/Welfare”.

For UNconditional welfare,

outvalue=1/(1-betta)*oo_.mean(strmatch('Utility',var_list_ ,'exact'))
        -oo_.mean(strmatch('Recursive_natural_welfare_equivalent',var_list_,'exact'))

You compute both Utility and Recursive_natural_welfare_equivalent via oo_.mean.

For CONDitional Welfare,

y_sim = simult_(M_,options_,initial_condition_states,oo_.dr,shock_matrix,options_.order); %simulate one period to get value

Recursive_natural_welfare_equivalent=y_sim(strmatch('Recursive_natural_welfare_equivalent',M_.endo_names,'exact'),2);
oo_.planner_objective_value = evaluate_planner_objective(M_,options_,oo_);
outvalue=(oo_.planner_objective_value(1)-Recursive_natural_welfare_equivalent)*100;

You compute the welfare of alternative policy and the benchmark via evaluate_planner_objective and simult_ respectively.

But MATLAB pops up that the former function does not support order = 2.
In the old post, you said:

Oo_.planner_objective_value

No, it is the conditional welfare. The formula is (evaluate_objective_function.m) planner_objective_value = Wbar+Wy*yhat+W_u*u+W_yu*yhat*u ... + 0.5*(W_yy*yhat^2 + Wuu_u^2+W_ss); That is, it is a full second order expansion. Note that the concept of welfare is W_t=U_t+beta*E_t (W_t+1) so that today’s endogenous and exogenous states are contained in the information set at time t and affect U_t. You can specify these initial conditions with histval.

I saw it is second order approximation.
So what is “does not support order = 2” real meaning?

@HelloDynare mentioned that:

@HelloDynare

evaluate_planner_objective: order>1 not yet supported

But except the last function, previous codes can be executed under the order = 2 ? I get it.

If this statement is correct, then

My question is: is oo_.planner_objective_value(1) accurate upto second order?
Moreover Can we approach the planner objective value via simult_ as well? such that we compute conditional welfare both of alternative policy and of the benchmark by the same method, just like what you do in the UNconditional welfare case.