How to write welfare loss function in Gali (2008)?
Posted: Thu Jan 27, 2011 5:31 pmDear all,
I just started to used Dynare so I apoligize for my silly questions...
I am trying to replicate the EHL (2000) model in the version elaborated by Gali (2008).
Namely, I want to perform some evaluation of alternative monetary policy rules, and obtain the results in the form of welfare losses with respect to steady state consumption. Is it possible to write down welfare losses as a function of the variance of price inflation, wage inflation and the output gap, as it is done in the book? How shall I do this? I tried but didn't go that far...
Many thanks in avance
I just started to used Dynare so I apoligize for my silly questions...
I am trying to replicate the EHL (2000) model in the version elaborated by Gali (2008).
Namely, I want to perform some evaluation of alternative monetary policy rules, and obtain the results in the form of welfare losses with respect to steady state consumption. Is it possible to write down welfare losses as a function of the variance of price inflation, wage inflation and the output gap, as it is done in the book? How shall I do this? I tried but didn't go that far...
Many thanks in avance