Use of 'ramsey_constraints' Command in Dynare 4.6.1

Optimal Policy
1

Dear Prof. Pfeifer,

This refers to the Block: ramsey_constraints; on Dynare manual v.4.6.1 Pg. 110

I have successfully coded the model to run the Ramsey Policy. But the Optimal Ramsey Policy gives a (-) response for one of the variables (Capital Adequacy Ratio). I want it to be (+).

As mentioned in Dynare manual v.4.6.1 Pg. 110, I introduced the ramsey_constraints; along with ramsey_model command as below. But the results wont change.

ramsey_constraints;
Chi > 0;
end;

I have seen that in this post,

you have mentioned that this Block: ramsey_constraints; work only in a perfect foresight context. But that reply was in 2018. And I hope that this now have been updated.

Because the latest Dynare Manual DOES NOT mention anything about perfect foresight context and according to that, I can simply use the ramsey_constraints; along with ramsey_model command.

Could you kindly tell me how exactly I have to use the ramsey_constraints; along with ramsey_model command without using the perfect foresight context.

I use Dynare v.4.6.1

My code reads as follows;

planner_objective ((((exp(C))^(1-cSigma))/(1-cSigma)) - (((exp(N))^(1+Nv))/(1+Nv)));

ramsey_model (planner_discount=0.99, instruments=(R, Chi));
stoch_simul (order=1);
ramsey_constraints;
Chi > 0;
end;

Thanks
Chashika

2

The ramsey_constraints-command introduces an occasionally binding constraint. You can only use it in a perfect foresight context.

3

Okay Professor. Thank you very much for confirming.