This repository contains codes accompanying “A Behavioral New Keynesian Model” by Xavier Gabaix, American Economic Review, 2020. It is also available as an AEA Data and Code Repository (for Dynare 4.5.3): openicpsr-117842.

Many thanks to Antonio Coppola (Harvard University) for help in preparing this replication package. Many thanks to Francesco Amodeo (UC San Diego) for updating the replication package to work with Dynare 4.6.4.

The code in this replication package requires Matlab and Dynare to be installed on your system.

The core files are the following:

• main.m: This file runs the entire code, ultimately producing the full set of figures in the paper. It loads parameters from the file paramFull.m and run the sub-programs listed below.

• paramFull.m: Please use this program to edit all model parameters. The default parameter values correspond to those used in the paper.

• mainZLB.m: Sub-program generating Figure 1 (ZLB is much less costly).

• mainForwardGuidance.m: Sub-program generating Figure 2 (forward guidance is less powerful).

• mainOptimalPolicy: Sub-program generating Figure 3 (optimal monetary policy in response to cost-push shock, with commitment). It also generates Figure 6 for the discretionary case.

• mainBRNKAugmentedPermanentShock.m: Sub-program generating Figure 4, Panel A (a permanent shock to the nominal interest rate).

• mainBRNKAugmentedTemporaryShock.m: Sub-program generating Figure 5, Panel B (a transitory shock to nominal interest rate).

• mainZLBCostCalibrations.m: Sub-program generating Figure 7 (comparison of ZLB cost under various calibrations).

All files with extension “.mod” are Dynare routines.

You only need to execute the file main.m using the Matlab interpreter to generate all figures in the paper. You can comment out the corresponding section in this file if you wish to turn off a particular figure.

Please ensure that Matlab’s working directory is set to the folder containing the file main.m. Please also ensure that Dynare is in your Matlab path in order to execute the code.