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# Block exogenous variables from being used in planner_objective #1264

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opened this issue Aug 10, 2016 · 0 comments

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### JohannesPfeifer commented Aug 10, 2016

 Currently, exogenous variables in the `planner_objective` are simply ignored in the preprocessor. When using ``````var pai, c, n, r, a; varexo u; parameters beta, rho, epsilon, omega, phi, gamma; beta=0.99; gamma=3; //Frisch elasticity omega=17; //price stickyness epsilon=8; //elasticity for each variety of consumption phi=1; //coefficient associated to labor effort disutility rho=0.95; //coefficient associated to productivity shock model; a=rho*(a(-1))+u; 1/c=beta*(1/(c(+1)))*(r/(pai(+1))); //euler omega*pai*(pai-1)=beta*omega*(c/(c(+1)))*(pai(+1))*(pai(+1)-1)+epsilon*exp(a)*n*(c/exp(a)*phi*n^gamma-(epsilon-1)/epsilon); //NK pc //pai*(pai-1)/c = beta*pai(+1)*(pai(+1)-1)/c(+1)+epsilon*phi*n^(gamma+1)/omega-exp(a)*n*(epsilon-1)/(omega*c); //NK pc (exp(a))*n=c+(omega/2)*((pai-1)^2); end; initval; pai=1; r=1/beta; c=0.9671684882; n=0.9671684882; a=0; u=0; end; histval; a(0)=0.9; end; shocks; var u; stderr 0.008; end; planner_objective(ln(c)-phi*((n^(1+gamma))/(1+gamma))*exp(u)); ramsey_policy(order=1,planner_discount=0.99); `````` the `exp(u)` does not appear in `_model_objective_static`. This is problematic, because in principle shocks at time t are part of the information set and should enter the objective. For that reason, @MichelJuillard agreed that we should block using exogenous variables in the objective and instead provide an error message like `You cannot handle exogenous variables in the planner objective. Please define an auxiliary endogenous variable like eps_aux=epsilon and use it instead of the varexo`

### houtanb closed this in ``` 7680749 ```Aug 12, 2016

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