Eviews5 / EViews5 / Example Files / docs / model

Models Models One equation rational expectations model (taylor1.prg) One equation rational expectations model (Taylor 1993) The following program replicates Figure 1-1 (p.14) from Taylor (1993) Macroeconomic Policy in a World Economy, Norton. The model is the simplest possible rational expectations model where real money demand depends on expected inflation. 'solution of forward looking model 'replicates simple one equation model in 'Taylor (1993) "Macroeconomic Policy in a World Economy," 'Figure 1-1, p.14 'last checked 3/25/2004 wfcreate taylor1 u 1 30 'set adjustment parameter !beta = 0.5 'set AR(1) parameter for monetary shock !rho = 0.8 'set lag for anticipated shock !lag = 10 'axis label graph !x0 = !lag + 1 'endogenous series series pt = 0 'exogenous shock series mt 'specify model model mod1 mod1.append -pt + mt = -!beta*(pt(+1) - pt) 'case (1): unanticipated temporary shock mt = 0 smpl @first @first mt = 1 smpl @all mod1.solve 'plot response series pt_1 = pt_0 pt_1.displayname Unanticipated temporary shock graph graph1.line pt_1 'case (2): unanticipated geometric shock mt = 0 smpl @first @first mt = 1 smpl @first+1 @last mt = !rho*mt(-1) smpl @all mod1.solve 'plot response series pt_2 = pt_0 pt_2.displayname Unanticipated gradual shock graph graph2.line pt_2 'case (3): anticipated temporary shock mt = 0 smpl @first+!lag @first+!lag mt = 1 smpl @all mod1.solve 'plot response series pt_3 = pt_0 pt_3.displayname Anticipated temporary shock graph graph3.line pt_3 graph3.draw(line,bottom,rgb(128,128,128)) !x0 'case (4): anticipated geometric shock mt = 0 smpl @first+!lag @first+!lag mt = 1 smpl @first+!lag+1 @last mt = !rho*mt(-1) smpl @all mod1.solve 'plot response series pt_4 = pt_0 pt_4.displayname Anticipated gradual shock graph graph4.line pt_4 graph4.draw(line,bottom,rgb(128,128,128)) !x0 'combine graphs freeze(g1) graph1 graph2 graph3 graph4 g1.setelem(1) lpat(solid) symbol(circle) g1.scale(left) range(0,1) g1.addtext(t) Effect of shocks in forward looking models (Taylor Figure 1-1, p.14) 'g1.legend -inbox position(1.2,0) g1.align(2,1.0,1.0) show g1 ^Top