From ed412266ddbd417722619514f1216b4e366aeb80 Mon Sep 17 00:00:00 2001 From: Johannes Pfeifer Date: Fri, 6 Sep 2024 14:27:35 +0200 Subject: [PATCH] Born_Pfeifer_2018_welfare.mod: fix mistake in composite target Thanks to Juan Paez-Farrell --- .../Welfare/Born_Pfeifer_2018_welfare.mod | 16 +++++++++++++--- 1 file changed, 13 insertions(+), 3 deletions(-) diff --git a/Born_Pfeifer_2018/Welfare/Born_Pfeifer_2018_welfare.mod b/Born_Pfeifer_2018/Welfare/Born_Pfeifer_2018_welfare.mod index f9c5875..54445e0 100644 --- a/Born_Pfeifer_2018/Welfare/Born_Pfeifer_2018_welfare.mod +++ b/Born_Pfeifer_2018/Welfare/Born_Pfeifer_2018_welfare.mod @@ -8,6 +8,16 @@ * It computes consumption equivalents relative to the flex-price natural allocation as described * in the paper. For doing so, it uses a solver to find the correct consumption equivalent lambda * based on the recursive lifetime welfare measures defined within the model block. + * + * Notes: + * - In September 2024 we have been made aware by Juan Paez-Farrell that the original code erroneously + * had switched the weights of the composite_targeting target. Instead of + * Pi_w^(lambda_w/(lambda_w+lambda_p))*Pi^(lambda_p/(lambda_w+lambda_p))=1; + * it had used + * Pi^(lambda_w/(lambda_w+lambda_p))*Pi_w^(lambda_p/(lambda_w+lambda_p))=1; + * Thus, instead of roughly a 85% weight on price inflation, only a 15% weight was put on it. + * This mistake leaves the qualitative results of the paper unaffected, but moves the results for the composite + * target case closer to the inflation targeting case, while it was rather close to the wage targeting case before. * * THIS MOD-FILE REQUIRES DYNARE 5.0 OR HIGHER * @@ -19,7 +29,7 @@ */ /* - * Copyright (C) 2018 Johannes Pfeifer and Benjamin Born + * Copyright (C) 2018-2024 Johannes Pfeifer and Benjamin Born * * This is free software: you can redistribute it and/or modify * it under the terms of the GNU General Public License as published by @@ -312,7 +322,7 @@ model; Pi_w=1; @#else @#if composite_targeting ==1 - Pi^(lambda_w/(lambda_w+lambda_p))*Pi_w^(lambda_p/(lambda_w+lambda_p))=1; + Pi_w^(lambda_w/(lambda_w+lambda_p))*Pi^(lambda_p/(lambda_w+lambda_p))=1; @#endif @#endif @#endif @@ -324,7 +334,7 @@ model; R=1/betta*Pi_w^phi_pi; @#else @#if composite_targeting ==1 - R=1/betta*(Pi^(lambda_w/(lambda_w+lambda_p))*Pi_w^(lambda_p/(lambda_w+lambda_p)))^phi_pi; + R=1/betta*(Pi_w^(lambda_w/(lambda_w+lambda_p))*Pi^(lambda_p/(lambda_w+lambda_p)))^phi_pi; @#endif @#endif @#endif