This repository contains code which estimates the empirical model in "Macroeconomic Uncertainty Prices when Beliefs are Tenuous" by Lars Peter Hansen and Thomas J Sargent. Appendix B from that paper outlines the methodology employed in this software.

To copy the code to your machine, you may either download it from the Github website directly or you may clone the repository in read-only mode.

This project simply requires the Anaconda distribution of Python version 3.x. Additional dependencies and prerequisites are handled automatically in setup.

Navigate to the folder containing the code and run the setup.sh script by entering

source setup.sh

Press y to proceed with installation when prompted. You will know that setup has been correctly implemented if the word (tenuous) contained in parenthesis appears on the current line of your terminal window.

To run the code, simply use

python tenuous_estimation.py

This code will print in terminal the estimated 10th, 50th, and 90th percentiles for the data. The results printed as weighted percentiles should be close to the results listed in Appendix B, with variations in random number generation accounting for any differences. The code will also produce a histogram for each of the relevant parameters, showing their distributions.

• John Wilson - [email protected]

• Thanks to Lloyd Han for a preliminary version of this code in Matlab