diff --git a/doc/dynare.texi b/doc/dynare.texi index 87578c10012debf8281bbb2740e2a7fa92948ba8..c0f5e2531439446dd4ccd644f0c93a80d15fb32f 100644 --- a/doc/dynare.texi +++ b/doc/dynare.texi @@ -1684,7 +1684,7 @@ The equations of the model are written in a block delimited by There must be as many equations as there are endogenous variables in the model, except when computing the unconstrained optimal policy with -@code{ramsey_policy} or @code{discretionary_policy}. +@code{ramsey_model}, @code{ramsey_policy} or @code{discretionary_policy}. The syntax of equations must follow the conventions for @var{MODEL_EXPRESSION} as described in @ref{Expressions}. Each equation @@ -1976,7 +1976,7 @@ example, the expression @code{EXPECTATION(-1)(x(+1))} is replaced by 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 +@code{ramsey_model} and @code{ramsey_policy} commands. In this case, they are used to represent the Lagrange 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 @@ -6035,7 +6035,12 @@ plot(dset_forecast.@{'r','e'@}); @section Optimal policy Dynare has tools to compute optimal policies for various types of -objectives. You can either solve for optimal policy under commitment +objectives. @code{ramsey_model} computes automatically the First Order +Conditions (FOC) of a model, given the @code{planner_objective}. You can +then use other standard commands to solve, estimate or simulate this +new, expanded model. + +Alternatively, you can either solve for optimal policy under commitment with @code{ramsey_policy}, for optimal policy under discretion with @code{discretionary_policy} or for optimal simple rule with @code{osr}. @@ -6141,6 +6146,65 @@ the value of parameters at the optimum, stored in fields of the form @code{oo_.osr.optim_params.@var{PARAMETER_NAME}}. @end defvr +@anchor{Ramsey} + +@deffn Command ramsey_model (@var{OPTIONS}@dots{}); + +@descriptionhead + +This command computes the First Order Conditions for maximizing the policy maker objective function subject to the +constraints provided by the equilibrium path of the economy. + +The planner objective must be declared with the @code{planner_objective} command. + +This command only creates the expanded model, it doesn't perform any +computations. It needs to be followed by other instructions to actually +perfrom desired computations. Note that it is the only way to perform +perfect foresight simulation of the Ramsey policy problem. + +@xref{Auxiliary +variables}, for an explanation of how Lagrange multipliers are +automatically created. + +@optionshead + +This command accepts the following options: + +@table @code + +@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 + +@customhead{Steady 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. A typical +example is choosing inflation or nominal interest rate as an +instrument. + + +@end deffn + @deffn Command ramsey_policy [@var{VARIABLE_NAME}@dots{}]; @deffnx Command ramsey_policy (@var{OPTIONS}@dots{}) [@var{VARIABLE_NAME}@dots{}];