ZLB, Optimal policy, Welfare

[jpfeifer]

1. I am not sure why you would want to go for extended_path. Didn’t you already get what you need with perfect_ foresight?
2. See

An elementary question on SGU 2006 expanded version

The answer always depends on what you are trying to do. Conditional welfare is something used when you ask whether a change in a policy regime is beneficial. In that case, you would start at or somewhere close to the steady state of the old regime and this is the starting point for the implementation of the new policy. If the steady states in the new regime is different, then you would need to compare welfare at the steady state of the old regime. Unconditional welfare in contrast is not concer…