Hello,
how can one re-calibrate Galì chapter 3 model to a monthly frequency? (see DSGE_mod/Gali_2015_chapter_3.mod at master · JohannesPfeifer/DSGE_mod · GitHub).
Does equations and/or variables need to be transformed in order to reproduce the quarterly IRFs with the monthly calibration?
I’m attaching my attempt, which does not perfectly reproduce the quarterly IRFs.
Thanks in advance.
gali_monthly.mod (8.3 KB)
What do you mean with
?
After adjusting the parameters to reflect the different frequency, you need to specify observation equations for the quarterly objects and then plot those. It seems you did that in your file, but you will need to plot at quarterly frequency as well. For example, you define average output over the last three months, but you would only observe those every three months.
Thanks for the reply!
If I look at the average output in the monthly calibration, defined as y_q = (y + y(-1) + y(-2))/3, and only plot it once every three months, it should look like the quarterly IRF for y, right?
It does not, so possibly the issue is with the calibration. However, the transformation of parameters seems standard, AR(1) coefficients are elevated to the power 1/3, discount factor implies return of 4% annual and price stickiness has (1/.25)*3 months of duration.
Do you have thoughts/suggestions about this? Thanks.
How different are we talking?
Substantially different, not a numerical approximation. There seems to be a conceptual mistake that I’m making.
Thanks!
The Taylor rule should also be different, I guess. Now you have the same feedback at the monthly level as at the quarterly one.
Thank you, I’ll try with this