Dear all, I have a question regarding the proper way of calculating the value of both the unconditional and conditional (upon starting from the steady state) welfare measure. From what I see after browsing similar questions here in the forum, in Dynare the unconditional welfare corresponds to the u…

Indeed, fixing the steady state solved the problem. Thanks a lot Prof. Pfeifer.

[image] HelloDynare: after a long-run period to compute the unconditional welfare. Hi @HelloDynare , if I may ask. What is long-run here? If you create a variable W = U + bet* U(+1), simulate the model and compute mean of W, you get conditional welfare (per this thread Welfare computation ). Bu…

The difference is about the information set of the expectations operator. Conditional welfare using conditional expectations, i.e. conditional on some information about the state today as well as potentially information on future shocks. For unconditional welfare, we use unconditional expectations. …

[image] jpfeifer: time average But how long should the time be for the average of (W = U + bet* U(+1)) be to be considered unconditional assuming the system is ergodic. And how short should the time be for W to be considered conditional?

That’s impossible to tell ex-ante. You would need to check for convergence or compute it analytically. Conditional involves evaluating welfare at a particular point in the state space today.

[image] jpfeifer: You would need to check for convergence or compute it analytically. I am lost here. Check the convergence of? The model? [image] jpfeifer: Conditional involves evaluating welfare at a particular point in the state space today. I think I get the concept. Like on the o…

The convergence of the average over periods to the expected value. If it still fluctuates considerably, it has not yet converged. You can use the simult_-function to compute welfare at any given point in time of your simulations. See e.g. [image] Two m files and two mod files Opti…

Dear Forum, I would like to calculate the welfare difference due to changing a particular parameter in my model and want to see is it welfare increasing or decreasing when I change the parameter. In order to do so, I am calculating consumption equivalent between two welfare values like this: \lamb…

Hi, Have you looked at this thread? [image] Consumption Equivalence_Welfare analysis Optimal Policy Hi, I am trying to proceed with a welfare analysis. I have estimated the values of consumption equivalence for the 2 regimes as well as the values from the welfare equat…

Dear Prof. Stéphane, I am getting welfare difference in order of thousands and leading to consumption equivalent values which are extremely large ( in the order of 10^18). This seems clearly unreasonable but I am unable to figure out whats wrong. Is there is any textbook troubleshooting for this? T…

Unconditional versus conditional Welfare measure

General DSGE Modeling

stepan-a 5 April 2024 19:20 20

Hi,

Have you looked at this thread?

Best,
Stéphane.