This folder contains replication code and data for Fratto, Chiara and Uhlig, Harald (2019). This code has been developed to guarantee compatibility with Dynare 4.4.2 and Matlab R2018b. Please refer to Stéphane Adjemian, Houtan Bastani, Michel Juillard, Frédéric Karamé, Junior Maih, Ferhat Mihoubi, George Perendia, Johannes Pfeifer, Marco Ratto and Sébastien Villemot (2011), “Dynare: Reference Manual, Version 4,” Dynare Working Papers, 1, CEPREMAP for more information on Dynare. The executable for Dynare 4.4.2 is available with this replication code in the folder Dynare. In all sections, run MAIN_FILE.m to generate figures and tables. Tables are stored in MAT format. Estimated times refer to a computer running Microsoft Windows 10 Home, Intel(R) Core(TM) i7-8750H CPU @ 2.20GHz, RAM 16.0 GB. Estimation In order to estimate the model, run MAIN_FILE.m. This file calls Dynare to solve all models contained in the paper. Please, be warned this could take a long time. The estimated time for running MAIN_FILE.m is 5 hours 32 minutes. Input: usmodel_data2015.mat – file containing the data for the models usmodel1948_2007.mod – Smets and Wouters (2007) model estimated with data from 1948 to 2007. usmodel1984_2007.mod – Smets and Wouters (2007) model estimated with data from 1984 to 2007. usmodel1984_2015.mod – Smets and Wouters (2007) model estimated with data from 1984 to 2015. usmodel1984_2007inflTarg.mod – Smets and Wouters (2007) with an inflation target in the Taylor rule, estimated with data from 1984 to 2007. In this version of the model, the value for the autoregressive coefficient of the inflation target AR process is set to 0.9. usmodel1984_2007inflTarg2.mod – Smets and Wouters (2007) with an inflation target in the Taylor rule, estimated with data from 1984 to 2007. In this version of the model, the value for the autoregressive coefficient of the inflation target AR process is estimated. Output: usmodel1948_2007.mat, usmodel1984_2007.mat, usmodel1984_2015.mat, usmodel1984_2007inflTarg.mat, usmodel1984_2007inflTarg2.mat – workspaces generated by the corresponding MOD files. usmodel1948_2007_mean.mat, usmodel1984_2007_mean.mat, usmodel1984_2015_mean.mat, usmodel1984_2007inflTarg_mean.mat, usmodel1984_2007inflTarg2_mean.mat – mean estimates from the corresponding MOD files. Main Figures and Tables This folder contains replication code for figures and tables from sections 3 to 7. All figures and tables are generated by MAIN_FILE.m with the exception of figure 2, generated by Phillips_curve.do. The estimated time for running MAIN_FILE.m is 3 minutes. Input: Phillips_curve.do – do-file to reproduce figure 2. usmodel_data2015.mat, usmodel_data2015.csv – files containing data for the model. The two files contain the same data. usmodel1984_2007_mean.mat – mode estimates from the corresponding MOD file. This file is generated in the Estimation folder. usmodel1948_2015.mod, usmodel2015_forecast_1948_2015.mod, usmodel2015_decomposition_1948_2015.mod – Smets and Wouters (2007) model. These model all use the same mode estimates based on 1984-2007 data. enlarge.m, englargeChiara.m – support files to generate figures. Output: VD_results_employment.mat and VD_results_inflation.mat – table storing results from variance decomposition for employment and inflation. Figures 1 to 14. Tables 1 and 2. Zero Lower Bound In this folder, we provide the replication code for section 8 of the paper on the Zero Lower Bound. Large parts of the code contained in this folder come from Guerrieri, Luca, and Matteo Iacoviello (2014). Occbin: A Toolkit to Solve Models with Occasionally Binding Constraints Easily., FEDS Working Paper No. 2014-47 (Journal of Monetary Economics, forthcoming) To run the code, modify and run setpathdynare4.m so as to point to the local Dynare installation directory and to the directory containing the folder toolkit_files. The folder toolkit_files and toolkit_files_private come from Guerrieri, Luca, and Matteo Iacoviello (2014) as available in the version from June 30, 2014 and files contained in those folders have not been modified. The folder Model contains the code to solve the model described in section 8 of the paper. MAIN_FILE.m is contained in folder Model. The estimated time for running MAIN_FILE.m is 3 minutes. Input: dnk.mod, dnk_zlb.m – model described in section 8 of the paper, respectively away from the ZLB area and at the ZLB. Files in toolkit_files and in toolkit_files_private – files from Occbin. setpathdynare457.m – modify this file to setup paths before running the code. Output: Figure 15 Figures and Tables on Alternative Models The estimated time for running MAIN_FILE.m in folder CET 2015 is 2 minutes. The estimated time for running MAIN_FILE.m in folder Inflation target and DSG 2015 is 2 minutes. The following files are borrowed from Del Negro, M., Giannoni, M. P., Schorfheide, F., 2015. Inflation in the great recession and new keynesian models. American Economic Journal: Macroeconomics 7 (1), 168-196, and have not been modified: d2Gammadomega2fcn.m, d2Gammadomegadsigmafcn.m, d2Gdomega2fcn.m, d2Gdomegadsigmafcn.m, dGammadomegafcn.m, dGammadsigmafcn.m, dGdomegafcn.m, dGdsigmafcn.m, Gammafcn.m, Gfcn.m, mufcn.m, nkfcn.m, omegafcn.m, zetabomegafcn.m, zetaspbfcn.m, zetazomegafcn.m, mhparam9049354700020085020Mode. The file usmodel_data2015Spread2.mat contains the same data used in previous sections with the inclusion of data on the spread, which are from Del Negro et al. (2015). The file mhparam9049354700020085020Mode contains the calibration from Del Negro et al. (2015). The subfolder CET 2015 contains the replication data for the subsection 9.3 on Christiano et al. (2015). The following files are borrowed from the replication package for Christiano, L. J., Eichenbaum, M. S., Trabandt, M., 2015. Understanding the great recession. American Economic Journal: Macroeconomics 7 (1), 110-167, and have not been modified. The file compute_solution.m is a modified version of the corresponding file from Christiano et al. (2015), where the time series of the shocks has been extended backwards to include the entire sample considered in our paper. The file cet.mod has been changed to load the data from the extended sample. The file zlbtargetsdata_extended.mat contains the data for the extended time series. The files plot_exog.m and plot_endog.m have been modified to plot the extended time series. In file param.m, we only modified the value of the parameter “horz”. Folder Inflation target and DSG 2015. Input: usmodel1984_2007inflTarg_dec1948_2015.mod – Smets and Wouters (2007) with inflation target in the Taylor rule. The model performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1984-2007. usmodel1984_2007inflTarg_mean.mat – mean values based on estimates contained in Estimation folder. They are used in the solution to the model with inflation target in the Taylor rule. usmodel2015_spread10_ff.mod – Del Negro et al. (2015). d2Gammadomega2fcn.m, d2Gammadomegadsigmafcn.m, d2Gdomega2fcn.m, d2Gdomegadsigmafcn.m, dGammadomegafcn.m, dGammadsigmafcn.m, dGdomegafcn.m, dGdsigmafcn.m, Gammafcn.m, Gfcn.m, mufcn.m, nkfcn.m, omegafcn.m, zetabomegafcn.m, zetaspbfcn.m, zetazomegafcn.m – support files to solve Del Negro et al. (2015). mhparam9049354700020085020Mode – calibration for Del Negro et al. (2015). enlarge.m, englargeChiara.m – support files to generate figures. usmodel_data2015.mat, usmodel_data2015Spread2.mat – file containing data for the model. Folder Inflation target and DSG 2015. Output: Figures 16 and 17. Folder CET 2015. Output: Figure 18. Appendix The estimated time for running MAIN_FILE.m is 8 minutes. The file graph_decomp_Chr.m is adapted from graph_decomp.m from Dynare. Input: usmodel_decomposition4807_1948_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1984-2007. usmodel_decomposition8415_1948_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1984-2015. usmodel2015_decomposition_2006_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 2006-2015. It uses the mode of the parameters from the estimation based on years 1984-2007. usmodel4807_1948_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1948-2007. usmodel_decomposition4807_1948_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1948-2007. usmodel8415_1948_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1984-2015. usmodel_decomposition8415_1948_2015.mod – Smets and Wouters (2007). The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1984-2015. usmodel1984_2007inflTarg.mod – Smets and Wouters (2007) with inflation target in the Taylor rule. It uses the mode of the parameters from the estimation based on years 1984-2007. In this version of the model, the autoregression coefficient for the inflation target is set to 0.99. usmodel1984_2007inflTarg_dec1948_2015.mod – Smets and Wouters (2007) with inflation target in the Taylor rule. The file performs the shock decomposition for the period 1948-2015. It uses the mode of the parameters from the estimation based on years 1984-2007. In this version of the model, the autoregression coefficient for the inflation target is set to 0.99. usmodel1984_2007inflTarg2.mod – Smets and Wouters (2007) with inflation target in the Taylor rule. Compared to other versions of the model, here the autoregression coefficient for the inflation target is estimated. Posterior estimates are based on data from 1984 to 2007. usmodel2015_spread10_ff.mod – Del Negro et al. (2015). usmodel_data2015.mat, usmodel_data2015Spread2.mat – file containing data for the model. usmodel1948_2007_mean.mat – mean values based on estimates contained in the Estimation folder. The estimates are based on data for years 1948-2007. usmodel1984_2015_mean.mat – mean values based on estimates contained in the Estimation folder. The estimates are based on data for years 1984-2015. usmodel1984_2007inflTarg_mean.mat – mean values based on estimates contained in Estimation folder. They are used in the solution to the model with inflation target in the Taylor rule, with autoregressive coefficient for the inflation target fixed to 0.99. usmodel1984_2007inflTarg2_mean.mat – mean values based on estimates contained in Estimation folder. They are used in the solution to the model with inflation target in the Taylor rule, with estimated autoregressive coefficient for the inflation target. usmodel1984_2007_mean.mat – mean values based on estimates contained in the Estimation folder. The estimates are based on data for years 1984-2007. usmodel1984_2007inflTarg_mean.mat – mean values based on estimates contained in Estimation folder. They are used in the solution to the model with inflation target in the Taylor rule. d2Gammadomega2fcn.m, d2Gammadomegadsigmafcn.m, d2Gdomega2fcn.m, d2Gdomegadsigmafcn.m, dGammadomegafcn.m, dGammadsigmafcn.m, dGdomegafcn.m, dGdsigmafcn.m, Gammafcn.m, Gfcn.m, mufcn.m, nkfcn.m, omegafcn.m, zetabomegafcn.m, zetaspbfcn.m, zetazomegafcn.m – support files to solve Del Negro et al. (2015). mhparam9049354700020085020Mode – calibration for Del Negro et al. (2015). enlarge.m, englargeChiara.m, graph_decomp_Chr.m – support files to generate figures. usmodel1984_2007.mat, usmodel2015_decomposition_1948_2015.mat, usmodel1948_2007.mat, usmodel1984_2015.mat – workspace from the homonymous MOD files. VD_results_employment.mat and VD_results_inflation.mat – table storing results from variance decomposition for employment and inflation. These files are generated in folder Main tables and figures. Output: Figures and tables from the online appendix.