Use ramsey to solve for optimal transition path

Dear all,

Thank you for help in advance! I really appreciate it.

I’d like to use ramsey function to solve for an optimal transition path from one steady state to another. Specifically, I use the RBC model provided by dynare, ‘ramst.mod’, extended to allow for a tax parameter “x”. The after-tax production function is ‘aaxk(-1)^alph’. I also assume there is a quadratic tax adjustment cost: ‘psi*(x-x(-1))^2’.

I want to solve for an optimal path for x from x=0.8 to 0.9. This requires x should not be higher than 0.9. This policy constraint is imposed by assuming a very large resource cost if x>0.9: ‘(x>0.9)*10000’.

However, when I use ‘ramsey’ to solve for the problem. Dynare gives the error:

[code]Reference to non-existent field ‘maximum_exo_lag’.

Error in check_model (line 22)
xlen = M_.maximum_exo_lag+M_.maximum_exo_lead + 1;

Error in stoch_simul (line 63)

Error in ramsey_policy (line 25)
info = stoch_simul(var_list);

Error in ramsey_transition (line 121)

Error in dynare (line 120)
evalin(‘base’,fname) ;[/code]

I attached the codes. can any one please take a look and let me know if anything goes wrong.

Thank you for your time in advance.
ramsey_transition.mod (1.88 KB)

You model does not feature any exogenous variables to which the transition could happen. I think that x should be a var_exo.

Sorry for the confusion. I set ‘x’ as an endogenous variable because it has to be optimally choosed to maximize the utility. I wonder if it is exogenous, can I still use it as an instrument in the ‘ramsey’?

Forget what I said. There was a bug in Dynare 4.3.3. Please try again with tomorrow’s unstable version.

I try with both 2013/11/6’s and 2013/11/7’s unstable version. Both versions give the following error:

[code]Error using print_info (line 51)
The Jacobian matrix evaluated at the steady state
contains elements that are not real or are infinite

Error in stoch_simul (line 81)
print_info(info, options_.noprint, options_);

Error in ramsey_policy (line 25)
info = stoch_simul(var_list);

Error in ramsey_transition (line 125)

Error in dynare (line 147)
evalin(‘base’,fname) ;[/code]

I was referring to the fact that there was a bug triggered by your model. This one has been fixed and you now get a correct error message. Unfortunately, I have no idea, what is causing your model not being able to solve.