Commit 2ca595aa authored by MichelJuillard's avatar MichelJuillard
Browse files

documenting option 'instruments' for ramsey_policy

parent 6a23afdd
......@@ -1730,7 +1730,7 @@ declared as @code{AUX_EXPECT_LAG_1 = x(+2)}.
Auxiliary variables are also introduced by the preprocessor for the
@code{ramsey_policy} command. In this case, they are used to represent the Lagrange
multipliers when first order conditions of the ramsey problem are computed.
multipliers when first order conditions of the Ramsey problem are computed.
The new variables take the form @code{MULT_@var{i}}, where @var{i} represents
the constraint with which the multiplier is associated (counted from the
order of declaration in the model block).
......@@ -4738,6 +4738,12 @@ This command accepts all options of @code{stoch_simul}, plus:
@item planner_discount = @var{EXPRESSION}
Declares the discount factor of the central planner. Default: @code{1.0}
@item instruments = (@var{VARIABLE_NAME},@dots{})
Declares instrument variables for the computation of the steady state
under optimal policy. Requires a @code{steady_state_model} block or a
@code{@dots{}_steadystate.m} file. See below.
@end table
Note that only first order approximation is available (@i{i.e.}
......@@ -4751,6 +4757,26 @@ This command generates all the output variables of @code{stoch_simul}.
In addition, it stores the value of planner objective function under
Ramsey policy in @code{oo_.planner_objective_value}.
@customhead{Steay state}
Dynare takes advantage of the fact that the Lagrange multipliers appear
linearly in the equations of the steady state of the model under optimal
policy. Nevertheless, it is in general very difficult to compute the
steady state with simply a numerical guess in @code{initval} for the
endogenous variables.
It greatly facilitates the computation, if the user provides an
analytical solution for the steady state (in @code{steady_state_model}
block or in a @code{@dots{}_steadystate.m} file). In this case, it is
necessary to provide a steady state solution CONDITIONAL on the value of
the instruments in the optimal policy problem and declared with option
@code{instruments}. Note that choosing the instruments is partly a
matter of interpretation and you can choose instruments that are handy
from a mathematical point of view but different from the instruments you
would refer to in the analysis of the paper. Typical example is choosing
inflation or nominal interest rate as an instrument.
@end deffn
Supports Markdown
0% or .
You are about to add 0 people to the discussion. Proceed with caution.
Finish editing this message first!
Please register or to comment