Stefan Niemann and Paul Pichler
"Optimal fiscal policy and sovereign debt crises"
February 2020


Approx 3 hrs total CPU time using
*Microsoft Surface Pro, Intel(R) Core(TM) i7-7660U CPU @ 2.50GHz, 2496 Mhz, 2 Core(s), 4 Logical Processor(s)
*MATLAB R2017b 
*Microsoft Windows 10 Pro


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  Replication Instructions
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I) Extract all files in the ZIP-folder NPRED_CodesData.zip and add folder NPRED_CodesData (with subfolders) to MATLAB path 
II) Run NPRED_MAIN.m to reproduce ALL quantitative results (Table 3 and figures)

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  Further information 
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NPRED_MAIN.m calls the following sub-routines:
*) NPRED_BusinessCycleStatistics.m
	* Calls Model_solution.m and Model_simulation.m
	* Solves and simulates the model for different calibrations and computes the business cycle statistics in Table 3
	* Displays results in MATLAB and writes statistics into NiemannPichler_RED.xls 
	* Saves model solutions in SOLUTION_1.mat, SOLUTION_2.mat, etc.
*) NPRED_plot_zones.m
	* Plots crisis and default zones under optimal fiscal policy (Figure 1)
*) NPRED_debt_policy_plots.m 	
	* Plots bond pricing and debt policy functions (Figure 2)
* NPRED_plot_sim.m
	* Plots public debt, crisis and default thresholds for varying discount factors (Figure 3)
	* Uses hand-selected simulation sequences stored in Plot_Sim_1-Plot_Sim_4
* NPRED_plots_entry.m
	* Plots fiscal policy when entering the crisis zone (Figure 4) and period utility (Figure 5)
	* Uses INTRO_MATERIAL_2.MAT to plot counterfactual policies 
* NPRED_plots_exit.m
	* Plots fiscal policy when leaving the crisis zone (Figure 6) 
*NPRED_crisis_narrative_matlabplots.m
	* Plots macroeconomic dynamics during Mexican debt crisis (Figure 7)
* NPRED_APPENDIX_debt_policy_plots
	* Plots debt policy functions for different TFP levels (Fig 8, Appendix)

The Mexican data statistics in Table 3 (together with the raw data from which they are constructed) are contained in DATASET_MEXICO_1980_2018.xls

The algorithms use parts of the CompEcon toolbox provided with the textbook 'Applied Computational Economics and Finance' by Mario J. Miranda & Paul L. Fackler, 2002, MIT Press; https://pfackler.wordpress.ncsu.edu/compecon/