olr — computes optimal policy under commitment
olr
[( OPTION
,... )] VARIABLE_NAME
[VARIABLE_NAME
...] ;
olr_beta=VALUE sets the value of the discount factor for the intertemporal optimization problem
All options for stoch_simul
olr computes optimal policies under commitment (Ramsey plans) for linear--quadratic problems of the form
maxu E0Σt=0∞βt(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.