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This folder contains code for generate figures 2-5 in the CET_note by LS in 2021.

1. figure 2: compute surfaces of standard deviation of unemployment percentage
point and fundamental surplus fraction given different parameter configurations of gamma and 
delta. In addition, we plot a non-exsistent equilibrium bay which shows clearly the boundary
above which an equilibrium fails to exist.

2. figures 3-5: perturb the estimated AOB model in CET by setting \delta=0 and recalibrate
a firm's cost \gamma of delay in bargaining so as to target the same std of unemployment in
the estimated model reported by CET. We also compare the impulse response functions for 12
variables with respect to three types of shocks between the original and the perturbed AOB models.

The results were computed using Matlab R2018a + Dynare 4.5.7
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                                           Figure 2

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1. This code is mainly based on the original code of CET 2016.
	- we made modifications to files
		1. find_steady.m
		2. cet_steadystate.m
		3. cet.mod

	- all the modifications can be located using the keyword "CET comment"

2. We add 4 new files
	- cet_elas_decomp.m
		This file decomposes the elasticity of unemployment into
		two parts: Upsilon and fundamental surplus

	- cet_simulation.m
		This file solves AOB models for different parameter configurations
		of gamma and delta and computes the std of unemployment percentage point
		and fundamental surplus

		The results are exported as matlab matrix files
			1. results.mat
				this matrix is used for plotting surfaces of std(u) and FS

			2. resulst_finer.mat
				this matrix is used for plotting non-existent equilibrium bay
				finer gamma grid is used here in order to have a smooth
				demarcation

	- plot_AOB_figures.m
		This file uses simulation results to create all the figures we report

	- plot_no_eq_bay.m
		This file plots the non-existent equilibrium bay.

3. To replicate the results, simply run "cet_simulation.m" to simulate data
   and run "plot_AOB_figures.m" to generate all the graphs.

   Note that "results.mat" and "results_finer.mat" are stored in the folder
   so we can get all the graphs without running "cet_simulation.m"

   * "cet_simulation.m" can take several hours to run
     for example, it takes 6~8 hours to complete simulation when using
     MacBook Pro (Retina, 13-inch, Mid 2014) with 2.6 GHz Intel Core i5

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                                           Figure 3-5

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1. To generate figures 3-5, run "cet_simulation.m"

2. This code takes much less time to finish compared to the code above for generating figure 2.

3. The perturbation of \delta and \gamma to the original CET AOB model is implemented by L490-494
   in "cet.mod", and the search for \gamma to keep the std of unemployment stay unchanged is done
   by L42-64 in "cet_simulation.m".