Welfare evaluation of Ramsey policy in model with distorted steady state

[jpfeifer]

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Oo_.planner_objective_value

Hi Ippei, in your previous post, there shouldn’t be any u(t) because u(t) is observed at the beginning of the period and belongs by assumption to the information set of E_t() If you want the unconditional welfare (a tricky concept), you could do the following include utility = u(y_t), the period utility function, among the variable/equation of the model. This doesn’t generate the same problem as adding the definition of welfare. then you can compute E(W_t) = E(u(y(t)) + \beta E(W_{t+1}) as E…