Hello everyone,

I am currently writing my Bachelor-thesis on monetary policy when there is a cost channel in place. I want to run simulations of a New Keynesian DSGE model using Dynare [Dynare] with equations for optimal monetary policy derived by hand and compare the results to the solution provided by the algorithm of Paul Söderlind. The latter refers to his paper "Solution and Estimation of RE Macromodels with Optimal Policy," European Economic Review, 43, 813-823, 1999.

Both simulations are running and the results look promising. However, I have not yet really understood the role of a certain input vector the Söderlind algorithm requires. As my thesis is due in two weeks, I hope to save some time finding someone who is familiar with the Söderlind-algorithm and can provide an intuitive explanation of the role of the "p"-vectors.

I will pose a more detailed question in a pm. If you have used said algorithm before and know how it works, please respond.

Greetings,
Adjmal.