This file provides a brief description of the files and folders containing the Matlab code that solves and estimates the model. The folder contains 12 subfolders, containing code for each model specification. 

For each model specification we have three main folders: “Code”, “Data” and “Save”, containing code, data and results. In the “Code” folder, the file “Main_estimation” is the main file to run (the “Main_estimation” file in each specification folder loads each specific model). We now provide a brief description of the codes in relation to tables and figures produced for the paper.

A. Table 1&2 produce the posterior distribution of the parameters for various model specifications (easily identified by the name of the subfolders). To compute the mode, set the option “Mode=1” in the “Main_estimation” file. In case you ran multiple modes (“Main_estimation” can be run as a function), set “Mode_boundle=1” to pick the mode. To compute the posterior distribution set “Hessian=1” and, afterwards, “Metropolis=1”. In the paper we compute 5 chains for each model specification (again, “Main_estimation” can be run as a function). Setting “Printposteriors=1” assembles the posterior distribution to be used in the tables.The full parameter distribution for each model spec is already saved in the “Mode” subfolder of the “Save” folder. For some model spec we only compute the model and not the full posterior distribution, consistent with the main text in the paper.

Note: it is advisable to run the options in the Main_estimation file one at the time. So if you are planning to run one option, make sure the others are set to zero. (Excluding the ShowParams option which just displays the parameters used.)

The tables are produced by running the files “CreateTablev1” and “CreateTablev2” in the “Temp_files” subfolder located in the folder “TwoCountries_singlegain”. To run these files, first run “Main_estimation” setting al options to zero to load all results. 

B. Table 3: Simulated moments. To produce the simulated moments set “Preds=1” in the “Main_estimation” file for each model specification, and make sure the option “MomentsSimulation” is set to 1. Go to the folder “TwoCountries_singlegain”. Table 3 is then produced running the file “CreateTablev3”  in the “Temp_files” subfolder. All moments for all specifications are already pre-saved so the table can be produced before running all the files.

C. To produce Tables 4-5 follow similar instructions to A. and B. but using the files in the folder “TwoCountries_twogains”. Then you can run the files “CreateTablev4” and “CreateTablev5” to produce the tables.

D. Figures. To produce shock decomposition figures, use the folder “TwoCountries_twogains”. In the “Main_estimation” file select “Preds=1” and “ShockDec=1”. This will also produce the figures. To produce the variance-decomposition figures, set “Stats=1” and this will produce the figures. Figures are already stored in the “Save” folder.

E. To plot impulse responses, go to the folder “TwoCountries_gain04”. Set “Preds=1” and “IRon=1” to produce the impulse responses. To plot, go to the “Temp_files” folder and run the “Plot_IRF” file.

We used 
Macbook pro, 2.9 GHz 6 cores; 32GB memory
PC 3.1 GHz 10 cores; 64 GB memory
Computation time for the benchmark model, the MCMC estimation with five chains run in parallel should be 5-10 hours.