Code for "Credit Cycles with Market-Based Household Leverage"

William Diamond and Tim Landvoigt¹

Fast Steps to Reproduce Benchmark Model

• In Matlab, execute the script main_create_env.

  • main_create_env will create a file env_bench_ini0 that contains the experiment definition for the benchmark economy on the initial coarse grid.

    • expername = 'bench_ini0';

    • guess_mode = 'no_guess';

• Execute script main_run_exper to run the benchmark on the coarse grid for up to 100 iterations.

  • You can set the number of parallel workers to be started.

  • Set to zero if you want to run it with a single process.

  • On a computer with sixteen cores (and 16 parallel workers) this should take about 30 minutes.

  • main_run_exper creates a results file named res_[current_date_time] that contains the converged policy functions.

  • Rename this file to res_20200904_bench_ini0.mat.

• Execute main_create_env again using results file from previous step as input.

  • Configure main_create_env as follows (leave other variables as is):

    • expername = 'bench';

    • guess_mode = 'guess';

    • guess_path = 'res_20200904_bench_ini0';

  • main_create_env will create a file env_bench that contains the experiment definition for the benchmark economy on the fine grid, using the resulting policy functions from the coarse grid iterations in res_20200904_bench_ini0.mat as initial guess.

• Execute script main_run_exper to run the benchmark on the fine grid for up to 100 iterations.

  • Configure main_run_exper as follows (leave other variables as is):

    • exper_path = 'env_bench.mat';

  • On a computer with sixteen cores (and 16 parallel workers) this should take about 45 minutes.

  • main_run_exper creates a results file named "res_[current_date_time]" that contains the converged policy functions.

  • Rename this file to res_20200904_bench.mat.

• Simulate the model using sim_stationary and sim_trans_irf.

  • sim_stationary simulates the model policies contained in res_20200904_bench.mat for 5,000 periods and writes out the resulting time-series and several statistics. The main output is a file named sim_res_20200904_bench.mat.

  • sim_trans_irf reads both res_20200904_bench.mat and sim_res_20200904_bench.mat, and simulates generalized IRFs.

  • To plot IRFs, run plot_trans_irf.

For More Details See readme_replication.txt

¹: Diamond: University of Pennsylvania Wharton School; email: [email protected]. Landvoigt: University of Pennsylvania Wharton School; email: [email protected].