Unconditional versus conditional Welfare measure

General DSGE Modeling
21

Thanks a lot Prof. Stéphane.

22

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? Thanks in advance!

23

Please provide the updated set of files, ideally in a zip-file.

24

Dear Prof. Pfeifer,

Please find the attached zip file of the code
try_initval_forum.zip (5.2 KB)

25

Why exactly are you comparing dSPR to recur_welfare?

26

Sorry Prof. Pfeifer, I did not understand your question. Can you please point to which equation your are referring to? In my model, dSPR is the deposit spread from the risk-free rate.

27

You hard-coded the position of the variables

V0 = oo_.steady_state(44);
V1 = oo_.steady_state(46);

One of them is dSPR. You should use syntax like

oo_.steady_state(strmatch('recur_welfare',M_.endo_names,'exact'))
28

Thanks a lot Prof. Pfeifer. I have changed the code. Unfortunately, the problem of welfare still persists.

29

What exactly is the problem now? Also, please provide the updated codes.

30

The consumption equivalent welfare gains are in the order of 10^19. Is this something that is normal?
try_initval_forum.zip (5.2 KB)

31

You need to manually inspect the steady states. You have a welfare difference of about 3000 points. That’s huge and needs to be explained by the components that make up welfare.

32

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