OBC_RBC_sims_PF.m

%Extra Example (RBC model + investment constraint) in the Supplementary Appendix.
%This code plots the perfect foresight solution following a negative TFP
%shock. To study a different example, simply change the parameters and matrices
%Model matrices are defined in the 'Insert' files
%Written by Michael Hatcher (m.c.hatcher@soton.ac.uk). Any errors are my own.

clc; clear; %close all;

T_guess = 20; % Final date before terminal solution (guess)
T_guess = max(T_guess,3);
T_sim = 51; % Simulation length
T_news = 3;
nat_num = 350;  %Integer >=1
N_guess = nat_num*T_guess;  %No. of guesses 
T_sim = max(T_sim,T_guess + 30);
vec_1 = ones(T_sim-T_guess,1);  %Vec of ones
    
%Model and calibration
run Insert_RBC

%No. of variables
nvar = length(B1(:,1));
nx = 1;  %No. exog vars in x

%Find terminal solution 
run Cho_and_Moreno

%Guessed structure
rng(1), ind_stack = randi([0 1],T_guess,N_guess);  %Initialize with random guesses
run Guesses_master
%run Guesses_master_2

%Shocks
e(1) = -0.04; e(2:T_news) = 0; %Specified news shocks
e_vec = [e(1) e(2:T_news) zeros(1,T_sim+1-T_news)]; 
X_init = zeros(nvar,1);   %Initial values

Omeg_t = NaN(size(Omega_bar,1), size(Omega_bar,2), T_sim);
Gama_t = NaN(size(Gama_bar,1), size(Gama_bar,2), T_sim);
Psi_t = NaN(size(Psi_bar,1), size(Psi_bar,2), T_sim);

%Check if M is a P matrix
not_P = NaN;
run M_matrix
run P_matrix
    
run PF_insert

run Solutions_insert 

run Print.m

%Plot results
T_plot = 51; %Time horizon in plot
T_sim2 = (T_sim<=T_plot)*T_sim + (T_sim>T_plot)*T_plot; 
Time = 1:T_sim2-1;  %Counter for time

%figure(1)
subplot(1,3,1), plot(Time,100*x_fin(1,1:T_sim2-1),'k'),  xlabel('Time'), title('Investment'), hold on,
subplot(1,3,2), plot(Time,x_fin(2,1:T_sim2-1),'k'),  xlabel('Time'), title('Capital'), hold on, 
subplot(1,3,3), plot(Time,x_fin(3,1:T_sim2-1),'k'),  xlabel('Time'), title('Consumption'), hold on,