Code accompanying

"Fiscal Stimulus and Distortionary Taxation"

09/2015

by Thorsten Drautzburg and Harald Uhlig

Note that FiscalStimulusCode_ReadMe.pdf contains a a more detailed documentation of the code.

1) The data is generated by DU_Dataset_Construction.m in the Data subdirectory.

2) We used Dynare 4.1.2 for all computations.

3) A short-cut to replicate most results contained in the paper is to evaluate the model at the posterior mean and to 
compute short-run and long-run multipliers at the posterior mean  and the steady state only: Start_Simulation_Table3n4_simplified.m 
replicates (almost) all of Tables 3 and 4 with numerical differences due to the simplifications.

4) To replicate the full results based on the full posterior distribution, first call "dynare DU_Posterior_Generation.mod"
 to generate the Bayesian posterior over the model parameters for the baseline model. 
For the robustness checks reported in the paper use:
- Baseline, but fixed tax adjustment speed: "dynare  DU_Posterior_Generation_AltPrior.mod "
- Normal tax adjustment, many RoT consumers: "dynare  DU_Posterior_Generation_AltPrior_HighPhi.mod "
- Slow tax adjustment, baseline RoT consumers: "dynare  DU_Posterior_Generation_AltPrior_LowPsi.mod "
- Slow tax adjustment, many RoT consumers: "dynare  DU_Posterior_Generation_AltPrior_LowPsiHighPhi.mod "

5) Configure and execute Start_Simulation_ZLB.m to simulate the model for each parameter draw and different scenarios.