Readme file for: Optimal Monetary Policy with Endogenous Export Participation, Dudley Cooke.



%%%%% EXPLANATION OF THE TABLES %%%%%



Table 2 contains results from two different models.  The first model has a fixed mass of firms.  The second features firm entry and export decisions.
The row 'All Firms' in Table 2 refers to the model with a fixed mass of firms and the row 'Endogenous' to the model with entry decisions.
Long-run inflation and the associated welfare loss are calculated for different parameter values (markup and elasticity of substitution).
The results in Table 2 correspond to the analytical sections of the paper (4.1 and 4.2, respectively). 

Table 3 compares models with entry and computes values of inflation and welfare for differeing amounts of firm-heterogeneity.

Table 4 contains results for a version of the model with long-lived firms, labor-income taxes, import tariffs, and asymmetric international asset positions.
In this case, the markup, the elasticity of substitution, and degree of firm-heterogeneity are fixed, and the firm exit rate is varied.



%%%%% EXPLANATION OF THE FILES %%%%%



There are three sets of files:


'All_Firms_' refers to the model with a fixed mass of firms (and no selection).

'Endogenous_Firms_' refers to the model with firm entry and export decisions.

'Long_Firms_' refers to the version of the model with long-lived firms.


Each set of files contains three sub files:


'Steady_State' computes the steady-state of the the model, for given policy.

'Optimization' generates the symbolic expressions for the derivatives of the Lagrangian.

'Policy' computes optimal policy using conditions from 'Optimization'.


For example, the file 'Endogenous_Firms_Optimization.m' generates the symbolic expressions for the derivatives of the 
Lagrangian used in 'Endogenous_Firms_Policy.m'. The file 'Endogenous_Firms_Policy.m' generate values under optimal policy in 
the model with firm entry and export decisions.



%%%%% HOW TO GENERATE THE VALUES IN THE TABLES %%%%%



Calaculation of the values in each Table is the same.  Consider the 'All_Firms_' set of files.

Open 'Steady_State'.  Fix monetary policy at the Friedman rule. Choose parameter values.
Make an initial guess (provided) and use the fsolve routine by pasting into the command window. 

Open 'Policy'. Use the same parameter values and make an initial guess of the system of equations (provided).  The fsolve routine produces a value for
the interest rate under optimal policy (to generate the system of equations, open 'Optimization' and run the file).

The value for long-run inflation is calculated using the interest rate multiplied by the subjective discount factor (expression provided).

The value for welfare loss is calculated by comparing allocations at the Friedman rule and under optimal policy using allocations
generated by 'Steady_State' (expression provided). 


For 'All_Firms_', each time parameter values are changed, the model is re-calibrated using the dis-utility of labor.

For 'Endogenous_Firms_', fixed costs are used to match the survival rate of new entrants and the export participation rate.

For 'Long_Firms_', the procedure is the same as 'Endogenous_Firms_', after the exit rate/taxes/tariffs/international asset position are fixed.

The 'Steady_State' files automatically produce values for targeted variables.