Dynare forums

OLG Optimal Taxation

I stated working with Dynare only recently and I am trying to learn how to use the “ramsey_policy” command.

I took your code for basic OLG model by David Pugh (https://github.com/davidrpugh/pyeconomi ... OLG-Models) and added taxes. It works and I get different allocations as I vary taxation.

I would like to be able to find the optimal taxes when say for instance the government has to raise some fixed revenue (for example 20% gdp). I have tried couple things but can't get it to work. Codes attached – one is David's with taxes and the other one is my attempt to add the ramsey to solve the planners problem for taxation. The second one incomplete for sure.

Any help or comments are very welcome. Thanks in advance.

That might be hard to impossible to do (depending on the setup). What you have in mind seems to be similar to the Schmitt-Grohe/Uribe (2004) paper where you get a unit in the government budget constraint and need to fix a trajectory corresponding to a particular debt level. That is unfortunately currently not possible with Dynare. But you could use the SGU-codes for this.