Part d.

Recall the international real business cycle model from this lessons practice problems with solutions. In particular, the setup of this model implied that characterizing in theory the dynamic solution for the 12 variables: C, C , N, N , K, K , I, I , Y , Y , NX, and NX required the following 12 equations:

The Matlab .m le called FullOERBC_CalibControluses the Matlab .m le called FullOERBC_CalibModel(a function) to solve for this models steady state, where parameters are assigned per the Stata analysis results you should have obtained earlier in this problem as well as using standard parameter assumptions from the international real business cycle literature. (For the purposes of the Matlab code the United States is the home country and the United Kingdom is the foreign country.)

However, these parameter assumptions are not definitive as the parameter values for Y, G, and G are arbitrary. Please modify the provided Matlab codes as needed (following the development in Lesson 6) to calibrate the model such that the values of Y, G, and G hit the following calibration target:

The rationale for these targets is as follows: the government-spending/GDP ratios for the home (United States) and foreign (United Kingdom) countries are calculated using the data that you used initially in this problem. In turn, it can be shown that same data that total work hours per population in the United States are 1.7212276 times total work hours per population in the United Kingdom. So, the parameter is normalized to 1 and the parameter is chosen to hit this total-work-hours ratio. Also, for the purposes of this code ZUK has been normalized to 1 and the corresponding U.S. parameter has been set to the ratio 1.140758039274864, which is the ratio of ZUS to ZUK using the estimated values you should have obtained from your work earlier in this problem. All told, please creat a version of the following table in the Word le you created earlier and ll out the table in with the values you obtain for the calibrated parameters.