Questions about Regime or policy switch coding in Dynare

[ahnulxy]

I have two policies Taylor rule A and B.
I want to follow Taylor rule A for certain periods time and then switch to rule B for the rest of time.
Is there anyone who can help! Thanks a million!

[jpfeifer]

More information is needed. Do you want a determinstic switch or Markov-switching? Is the change anticipated or a surprise?

[ahnulxy]

I want a deterministic switch at first.
Taylor rule A: i_t = alpha1*pi_t + beta1*y_t
Taylor rule B: i_t = alpha2*pi_t + beta2*y_t

I want to stick rule A for 10 periods and afterward, I want to follow rule B.
How Can I code this in Dynare?

If could be great if you can give some hint! Thank very much!

[jpfeifer]

You define alpha and beta as exogenous variables, i.e. use varexo for them. Then you use the shocks command to set their values for simul. E.g.:

Code: Select all

shocks;
var alpha;
periods 1:10 , 11:20;
values 2, 1.5;
end;


[ahnulxy]

You define alpha and beta as exogenous variables, i.e. use varexo for them. Then you use the shocks command to set their values for simul. E.g.:

Code: Select all

shocks;
var alpha;
periods 1:10 , 11:20;
values 2, 1.5;
end;


Thanks very much, jpfeifer! You are so helpful! By the way, could you give me some ideas on how to do this for Markov-switching?

[jpfeifer]

That is not easy. See e.g. http://ideas.repec.org/p/fip/fedkrw/rwp13-01.html. For easy linearized models there may be easier ways, but this is not my area of expertise.