olr

olr — computes optimal policy under commitment

Synopsis

olr [( OPTION,... )] VARIABLE_NAME [VARIABLE_NAME...] ;

OPTIONS

  • olr_beta=VALUE sets the value of the discount factor for the intertemporal optimization problem

  • All options for stoch_simul

Description

olr computes optimal policies under commitment (Ramsey plans) for linear--quadratic problems of the form

maxu E0Σt=0βt(yt′W11yt+2yt′W12ut+ut′W22ut)

s.t.

A1Et(yt+1)+A2yt+A3yt-1+But+Cet=0

with

  • y: endogenous variables

  • u: policiy instrument

  • e: exogenous stochastic shocks

  • β: discount factor

The policy instruments must be listed with olr_inst.

The quadratic objectives must be listed with optim_weights.

Multipliers are automatically added to the model. Note, however, that the representation isn't minimal and that, in the solution, some multipliers could be sustituted off.

Forward-looking endogenous variables don't need to be present in the dynamics of the economy.

Dynare automatically builds the corresponding linear rational expectation model and solves it as with stoch_simul.