feedback rules, target values and steady-state

[petros_varth]

Hi all,

I use in my model feedback rules. I would like to set as target values the steady-state values that will arise from dynare. As i did it, firstly i found a steady-state with setting the feedback coefficients to zero, then i declare as parameters the target values and assign them the steady-state value i found. But these is not correct because you end up with different steady-states if you use different feedback coefficients.
How i can do it properly in Dynare?

Please see also the attached file.

P.

[jpfeifer]

Essentially, your are looking for fixed point. The easiest way that works here, because your starting values are good, is to use Dynare's steady_state operator. I.e. replace
the Taylor rule with the only approximately correct target values

Code: Select all

log(r/RT)=FIP*log(dcpi/DT)+FIY*log(y/YT);

with

Code: Select all

log(r/RT)=FIP*log(dcpi/steady_state(dcpi))+FIY*log(y/steady_state(y));


Dynare will try to solve for the steady state values of inflation and output and substitute them. Note that now the steady state is truly independent of the feedback coefficient values.

[petros_varth]

Many thanks. This works perfect.

P.