Taylor Curve calculation

General DSGE Modeling Replication Attempts
1

Dear all,

I am trying to replicate a Taylor Curve, which illustrates a trade-off between Output gap variance and Inflation variance. I found it in this article by M. Rubio (2020), but I couldn’t find any available replication code, and I struggle to replicate it by myself.

Would anyone be so kind as to point me in the right direction?

Thank you very much in advance! :slight_smile:

JH

2

Did you see

3

Thank you for such prompt response professor. I followed the guide you provided there and my model is now functional, but the results don’t make a lot of sense. For my TR, I get the following optimal values:

image

I am also trying to plot the TC, but the graph doesn’t seem to be ok either:
image

This is the mod file I use:
mod_TC.mod (11.7 KB)

4

Your last weight is problematic. In Dynare 6, use
mod_TC.mod (11.8 KB)

% make loop silent
options_.nofunctions=1;
options_.nocorr=1;
options_.noprint=1;
options_.irf=0;
options_.silent_optimizer=1;
options_.analytic_derivation=true;

options_.osr.opt_algo=1;

% find position of variables in variable_weights
ygap_pos=strmatch('ygap',M_.endo_names,'exact');
pi_pos=strmatch('pi',M_.endo_names,'exact');

% find position of variables in var_list_
ygap_pos_var_list_=strmatch('ygap',var_list_,'exact');
pi_pos_var_list_=strmatch('pi',var_list_,'exact');

weight_grid=0:0.05:0.99;
n_grid_points=length(weight_grid);
var_ygap=NaN(n_grid_points,1);
var_pi=NaN(n_grid_points,1);
for grid_iter=1:n_grid_points
    M_.osr.variable_weights(pi_pos,pi_pos) = weight_grid(grid_iter);
    M_.osr.variable_weights(ygap_pos,ygap_pos) = (1-weight_grid(grid_iter));
    [info, oo_] = osr.run(M_, options_, oo_, var_list_, M_.osr.param_names, M_.osr.variable_indices,M_.osr.variable_weights);
    if info(1)==0
        var_ygap(grid_iter)=oo_.var(ygap_pos_var_list_,ygap_pos_var_list_);
        var_pi(grid_iter)=oo_.var(pi_pos_var_list_,pi_pos_var_list_);
    end
end
figure
plot(var_ygap,var_pi)
5

Thank you, professor!