From 2ca595aa844954522471eb55bf08f6302debec66 Mon Sep 17 00:00:00 2001 From: Michel Juillard Date: Fri, 20 Apr 2012 16:01:44 +0200 Subject: [PATCH] documenting option 'instruments' for ramsey_policy --- doc/dynare.texi | 28 +++++++++++++++++++++++++++- 1 file changed, 27 insertions(+), 1 deletion(-) diff --git a/doc/dynare.texi b/doc/dynare.texi index a9926564a..a73b1cfdf 100644 --- a/doc/dynare.texi +++ b/doc/dynare.texi @@ -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 @anchor{discretionary_policy}