Luca Guerrieri, Dale Henderson, and Jinill Kim, "Interpreting Shocks to the Relative Price of Investment with a Two-Sector Model", Journal of Applied Econometrics, Vol. 35, No. 1, 2020, pp. 82-98. The file GHK-programs.zip includes codes to replicate all the figures in the paper. Before running any of the codes, the program setpath_windows.m needs to be updated to reflect the path of the local installation of Dynare. If needed, Dynare can be downloaded from https://www.dynare.org/ The replication codes in this directory do not include the .mat files that contain the estimation and Monte Carlo results. The .mat files need to be produced anew by running the programs described in the sections "VAR results" and "Monte Carlo experiments" below. Depending on the platform used, running the Monte Carlo experiments can be time-consuming. The .mat files with the results were omitted from this replication package to reduce the storage requirements, but they are also available in an extended replication packet that can be downloaded from http://www.lguerrieri.com/rep_codes_1018.zip ------------------ List of figures and programs: Figure 1 and 5, run repfisher.m Figure 2, run run_plot_densities_var.m Figure 3, run call_smallmod4.m Figure 4, run run_plot_densities.m Figure 6 and 8, run_monte_smallmod4.m Figure 7 and 9, run_monte_smallmod4_ist.m Figure 10, run_monte_smallmod4_largesample.m Figure 11, run_monte_smallmod4_ist_largesample.m NOTA BENE: VAR results repfisher.m extends Fisher's empirical work to encompass the response of investment to both TFP and sectoral MFP shocks The VAR includes 1) the change in the relative price of investment 2) labor productivity growth 3) hours per capita 4) consumption growth per capita 5) investment growth per capita Apart from computing IRFs, repfisher finds the correlation between consumption and investment at business cycle frequencies implied by the VAR when only shocks to the relative price of investment are turned on or when only neutral shocks to labor productivity are turned on. repfisher.m produces Figure 1 and Figure 5 (in the appendix). Results for the correlations are saved in .mat files whose names are selected based on the switches set at the top of the program. These files are also needed to assemble Figure 2 and Figure 4. There are switches at the top of the program to select the three cases shown in Figure 2. After running repfisher with each of the 3 alternative switches. Run run_plot_densities_var to reassemble Figure 2. ------------------ Monte Carlo experiments The programs runestim_smallmod4.m and runestim_smallmod4_ist.m estimate the parameters for the shock processes used in the two alternative models -- make sure to line up the standard deviation of the MFP, IST, and neutral shock so that the long-run responses of the relative investment price and of labor productivity in the model match the VAR. call_smallmod4 produces Figure 3 and saves some population moments needed in Figure 4. call_smallmod4_ist saves some population moments needed in Figure 4. run_monte_smallmod4 runs the Monte Carlo experiment using the MFP model as DGP and saves data needed for Figure 4. It produces Figures 6 and 8 (in the appendix) and part of the data for Figure 4. run_monte_smallmod4_ist runs the Monte Carlo experiment using the IST model as DGP and saves data needed for Figure 4. It produces Figures 7 and 9 (in the appendix) and part of the data for Figure 4 Figure 4 is assembled invoking run_plot_density.m, which compares the densities for the correlation between c and i from the VAR, the MFP model and the IST model. ------------------ All text files are in DOS format. However, data files are in .xls and .xlsx format. ------------------ Questions on this package can be directed to: luca.guerrieri [AT] frb.gov