Policy Switching in Dynare

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Policy Switching in Dynare

Postby sp1589 » Thu Apr 27, 2017 1:15 am

Hello,

I would like to ask how I can implement a one time switch in policy. Say, I have a peg for the short-term interest rate from periods 0 to 20. Then at time T=20 and on, I would like to switch to a non-peg regime. Think of the simplest way to model a peg. I have a taylor rule with a response to inflation equal to 0 (i.e parameter on inflation stabilization is 0). Then, at T=20, I want that parameter to switch to say 1.5. Can I implement this in dynare?

Also, from what I have read, Dynare does not support Markov switching processes in DSGE model yet. Is that available for the unstable version and is there a new stable version that supports Markov chains for DSGE models in Dynare.

Thank you
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Re: Policy Switching in Dynare

Postby jpfeifer » Thu Apr 27, 2017 8:54 am

That depends on the context. For perfect foresight, this can be done quite easily. A proper regime switching DSGE model is not supported. I would point you to Junior Maih's RISE toolbox for this.
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Johannes Pfeifer
University of Cologne
https://sites.google.com/site/pfeiferecon/
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