Christopher Gibbs, University of Sydney
Nigel McClung, Bank of Finland
Date created: 14/2/2023


This folder contains the code to replicate the key figures and results from Gibbs and McClung (2023). The code is written in MATLAB (R2018a) and Mathematica (v. 11.3).

The folder titled, "Proofs," contains three Mathematica Notebooks that provide analytic derivations required for the proof of Proposition 3 in the paper. NK_SunSpot_proposition_proof_final.nb and NK_SunSpot_proposition_proof_outputgap_final.nb provide the derivations that underlie the proof of the sunspot part of Proposition 3. Prop_3_MSV.nb provides derivations for the MSV solution part of the proposition. 

The folder titled, "Figures," contains Mathematica and MATLAB code to replicate all the figures in the text and appendix. Some of the MATLAB figures require Dynare (version 4.5.6 was used on a Windows 10 machine). The replication figures are named according to the figure numbers as they appear in the text and appendix of the paper. Each file is self-contained and may be run without running any of the other files. On most machines, each of the programs should complete within a few second with the exception of the files that recreate Figure 4. The replication files for Figure 4 may take a few minutes depending on the speed of your machine. The list of files to recreate each figure is

Main Text:
Figure 1: IE-stability Exploration - Figure_1.nb
Figure 2: Forward Guidance Announcements in the Smets and Wouter's Model - Figure_2_main.m, Figure_2_main_b, 	Figure_2_main_impact.m, Figure_2_main_b_impact.m
Figure 3: IE-stability and Determinacy Regions - Figure_3_a.m, Figure_3_b.m
Figure 4: IE-stability, Price Level Targeting, and Reneging - Figure_4det_estab.m, Figure_4det_estab_PLT.m, 	Figure_4largest_eigenvalue.m
Figure 5: Reneging and the Forward Guidance Puzzle - Figure_5impcred_IT.m, Figure_5impcredPLT.m

Appendix:
Figure A6: Forward Guidance Announcements in the Smets and Wouter's Model - Figure_A6a_appendix.m, Figure_A6b_appendix.m, 	Figure_A6c_impact_appendix.m, Figure_A6d_impact_appendix.m
Figure A7: Forward Guidance Announcements and the ZLB in the Smets and Wouter's Model - Figure_A7a_appendix.m, 	Figure_A7b_appendix.m

The .mod file usmodel_1_SW_par_FK.mod is a modified version of the .mod file provided by Smets and Wouters as part of the replication for their 2007 American Economic Review article. The original file may be obtained from the AER's website. Some of the figure .m files reference functions to solve the models found in the folder, "Functions." The programs bp2smats.m, dyn_to_str.m, rfmats.m, smats.m, and smatsbp.m where obtained from Callum Jones. Up-to-date versions of the code may be found at https://callumjones.github.io/. The programs fmlre.m and fmmsre.m were written by Seonghoon Cho. Up-to-date versions may be found at https://sites.google.com/site/sc719en/research.