Welfare ranking of monetary/ fiscal rules

[tom_mercer]

Hello friends,

I wish to compare the welfare ranking of different combinations of monetary and fiscal rules for a New Keynesian model. Can Dynare provide welfare numbers to see which combination is the best - or is there some other way?

Thank you,

Tommy

[jpfeifer]

You need to define utility recursively and use a second order approximation. See e.g. http://www.dynare.org/phpBB3/viewtopic.php?f=1&p=18427#p18427

[Ana]

Can the model be entered *linearly* into Dynare to compute this recursive utility?

Also, can someone provide an example code - would like to check if W should be specified as part of the model block or outside.

Thank you,
Ana

[jpfeifer]

No, in general you cannot use a linear version of this. See my answer at http://www.dynare.org/phpBB3/viewtopic.php?f=1&p=19991#p19991.

Yes, you need to define welfare within the model block.