I was going through this paper by Aghion et al. I wanted some clarification on some of the computations. I understood the process uptil the normalization on page 22. Then we can get some policy rules for the economy based on those variables and equations.
I don't precisely know how to proceed from here and it seems like an indication that I am not clear on what I am doing. After they get their policy rules, they go ahead and get optimal long run taxes. I am not sure how I should use my policy rules to get to that result.
Before reading the methodology I would've thought that all we would do was to calculate the steady states of the transformed equations, get some societal welfare function in terms of the transformed stationary equations, and iterate over taxes in the steady state and see what gave us the highest welfare. But the paper seems to want to transform the variables to the untransformed versions before that.
Any help/references would be great. I am using Dynare to solve a very similar problem, but I don't know exactly what to do after I have solved for the policy rules of the transformed variables.