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figure1.m
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figure1.m
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%% figure1.m
%
% This script produces the six panels of figure 1.
%
%% Description
%
% The script computes the effects of an expansionary monetary shock in two New Keynesian models:
%
% * New Keynesian model with fairness
% * Textbook New Keynesian model
%
% It computes the impulse response functions (IRFs) for six variables:
%
% * Exogenous component of monetary policy
% * Inflation rate
% * Perceived price markup
% * Actual price markup
% * Employment
% * Output
%
% The script then displays the six IRFs for the two models.
%
%% ----------------------------------------
close all;
clear;
clc;
%% ---------- Compute IRFs using Dynare ----------
%% IRFs for New Keynesian model with fairness
dynare irfFairnessMonetary.mod
irfFairness = cell2mat(struct2cell(oo_.irfs));
%% IRFs for textbook New Keynesian model
dynare irfTextbookMonetary.mod
irfTextbook = cell2mat(struct2cell(oo_.irfs));
%% Annualize exogenous component of monetary policy & inflation rate
irfFairness([1,2],:) = 4.*irfFairness([1,2],:);
irfTextbook([1,2],:) = 4.*irfTextbook([1,2],:);
%% ---------- Format graphics ----------
%% Set default properties
set(groot,'DefaultFigureUnits', 'inches')
set(groot,'DefaultFigurePosition', [1,1,7.7779,5.8334]);
set(groot,'DefaultFigurePaperPosition', [0, 0, 7.7779,5.8334]);
set(groot,'DefaultFigurePaperSize', [7.7779,5.8334]);
set(groot,'DefaultAxesFontName', 'Helvetica')
set(groot,'DefaultAxesFontSize', 22)
set(groot,'defaultAxesLabelFontSizeMultiplier',1)
set(groot,'defaultAxesTitleFontSizeMultiplier',1)
set(groot,'defaultAxesTitleFontWeight','normal')
set(groot,'DefaultAxesXColor','k')
set(groot,'DefaultAxesYColor','k')
set(groot,'DefaultAxesGridColor','k')
set(groot,'DefaultAxesLineWidth', 1)
set(groot,'DefaultAxesXGrid','off')
set(groot,'DefaultAxesYGrid','on')
set(groot, 'defaultAxesTickDirMode', 'manual')
set(groot,'defaultAxesTickLength',[0.01 0.025])
set(groot, 'defaultAxesTickDir', 'out')
set(groot,'DefaultLineLineWidth', 3)
%% Pick color palette
blue = '#386cb0';
orange = '#bf5b17';
%% ---------- Plot IRFs for all variables ----------
horizon = [0:1:12];
variable = {'Exogenous component of monetary policy','Inflation rate','Perceived price markup','Actual price markup','Employment','Output'};
nVariable = length(variable);
for iVariable = 1:nVariable
figure(iVariable)
clf
hold on
% Plot IRF in model with fairness
plot(horizon,irfFairness(iVariable,horizon+1),'-','DisplayName','New Keynesian model with fairness','Color',blue)
% Plot IRF in textbook model
plot(horizon,irfTextbook(iVariable,horizon+1),'-.','DisplayName','Textbook New Keynesian model','Color',orange)
% Populate y-axis
set(gca,'YLim',[-1.5,1],'YTick',[-1.5:0.5:1],'YTickLabel',['-1.5%';' -1%';'-0.5%';' 0%';' 0.5%';' 1%']);
ylabel(variable(iVariable))
% Populate x-axis
if iVariable<5
set(gca,'XLim',[0,12],'XTick',[0:4:12],'XTickLabel',[])
else
set(gca,'XLim',[0,12],'XTick',[0:4:12],'XTickLabel',['0';'1';'2';'3'])
xlabel('Years')
end
% Populate caption
if iVariable==1
legend('show','Location','northeast')
else
legend('off')
end
% Print figure as PDF
name = lower(regexprep(variable{iVariable},' ','_'));
print('-dpdf',['figure_1_',name,'.pdf'])
end