Codes required to replicate the empirical and theoretical results in the paper. See readme files in the subdirectories for files to run.

Software required: MatLab with Dynare (written using MatLab 9.0.0 and Dynare 4.4.2 on Windows 10).

Computation time for almost all parts is short (a few seconds for empirical results, less than a minute for model results). The only exception is model sensitivity to parameter \sigma_b (figure 7 in the paper). This can take up to a few minutes. The line to run this sensitivity analysis is commented out in the code but can just be un-commented if desired.

The random number seed for the simulations done by Dynare is set in the simulation files.