There are two versions of this assignment, an easy one and a harder one. The harder one has some advantages. However, if you just want to get a feel for what is going on, you should take the easy road.

The easy approach.

The pdf of the assignment is contained in the following zip file. The pdf file with a statement of the assignment is in the zip file. There is also a brief document with some instructions on the use of Dynare 4. You will need to use Dynare 4 to do this assignment. You can download that software from the Dynare website, or, in case there are problems here is a version of the code that I know works with the assignment.

The harder approach.

The harder approach is coded up to work with Dynare 3, though it could easily be adapted to Dynare version 4. It uses Andy Levin’s code to do the Ramsey calculations. It is a little more cumbersome to implement than the easy approach above. However, Levin’s code ultimately gives you a mod file with all the equations of the Ramsey problem, something that you might find convenient for some purposes (taking higher order approximations, estimation, pure curiosity about what the equations actually look like….).

The Dynare 3 of the assignment 8 is here. To do the assignment, you will need two additional sets of code. You will need the Dynare version 3 code.

You will also need to use code for computing optimal monetary policy that was prepared by Andy Levin (Federal Reserve Board). This code may be used freely. However, if you use it in your research, please include an acknowledgement, ‘the code for this is taken from Andrew Levin, Lopez-Salido, J.D., 2004. "Optimal Monetary Policy with Endogenous Capital Accumulation", manuscript, Federal Reserve Board, and Andrew Levin, Onatski, A., Williams, J., Williams, N., 2005. "Monetary Policy under Uncertainty in Microfounded Macroeconometric Models," in NBER Macroeconomics Annual 2005, Gertler, M., Rogoff, K., eds. Cambridge, MA: MIT Press.’

Andy Levin’s code may be downloaded in the following zip file.

http://faculty.wcas.northwestern.edu/~lchrist/d16/d1606/Get_Ramsey.zip

Note: Tu Wei, a Ph.D. student in the China Economics and Management Academy, Central University of Finance and Economics, Beijing, China, has found that one m file in the above zip file is not compatible with current versions of MATLAB. He has kindly provided a version of get_ramsey.m which works on MATLAB version 2012b. Tu Wei’s (Chinese) blog may be found at http://user.qzone.qq.com/124938632/main#home