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Dear all,

I am trying to replicate the results of the paper " The effects of monetary policy news and surprises " by Milani and Treadwell (2012) JMCB

I have written the codes for this paper which are attached below.

However, when I compare my IRFs with those found in the original paper I get different results for the impact effect of a surprise monetary policy shock, i.e. instead of declining on impact, output gap increases. Any thoughts?

I also attach the paper

I would appreciate any help on this matter

Thanks

L.

Hi Luciano,

There are 2 mistakes in the first equation if I compare your code with the equation (1) of the published Milani et Treadwell (2012) (equation 2.1 of your attached file):
First:

Code: Select all

tilda = sigma*(1-phi)/(1+phi);

It should be "-sigma..." or "-tilda" in the equation.

Second, "epsilon" and "theta" seem to be reversed (or x(-1) and x(+1) in equation 1).

I hope it will help and I let you check if there are some other mistakes...

Cheers,
L.

Dear ludog,

Thanks! However, after implementing your suggestions it is still not replicating the paper correctly...

Thanks for your help!

L.

I did not check everything but there is at least one similar mistake in your second equation (your delta is for pi(+1) not pi(-1)).
You should check equation by equation, I believe that it is part of learning

Cheers,
Ludo