From b957fd189b5ad5ffa5e898b8775795dbd6ea829e Mon Sep 17 00:00:00 2001
From: Johannes Pfeifer <jpfeifer@gmx.de>
Date: Mon, 18 Oct 2021 17:15:05 +0200
Subject: [PATCH] Document second-order accurate approximation of welfare at
order=2
(cherry picked from commit 2c204538611357b2525661127c73f67110dba062)
---
doc/manual/source/the-model-file.rst | 6 ++++--
1 file changed, 4 insertions(+), 2 deletions(-)
diff --git a/doc/manual/source/the-model-file.rst b/doc/manual/source/the-model-file.rst
index b8bd7d89e3..8419124101 100644
--- a/doc/manual/source/the-model-file.rst
+++ b/doc/manual/source/the-model-file.rst
@@ -4220,7 +4220,8 @@ Computing the stochastic solution
variance-covariance of the endogenous variables. Contains
theoretical variance if the ``periods`` option is not present and simulated variance
otherwise. Only available for ``order<4``. At ``order=2`` it will be be
- a second-order accurate approximation. At ``order=3``, theoretical moments
+ a second-order accurate approximation (i.e. ignoring terms of order 3 and 4 that would
+ arise when using the full second-order policy function). At ``order=3``, theoretical moments
are only available with ``pruning``. The variables are arranged in declaration order.
.. matvar:: oo_.var_list
@@ -10229,7 +10230,8 @@ with ``discretionary_policy`` or for optimal simple rules with ``osr``
At the current stage, the stochastic context does not support the ``pruning`` option.
At ``order>3``, only the computation of conditional welfare with steady state Lagrange
- multipliers is supported.
+ multipliers is supported. Note that at `order=2`, the output is based on the second-order
+ accurate approximation of the variance stored in `oo_.var`.
*Example (stochastic context)*
--
GitLab