The homework requires analytical solutions

5-OECD IRFs construction/OECDarControl(1).do

//Clear the memory clear //Set default "more" option off set more off //Map Stata to where dataset is stored cd "E:\New folder ALL\ONLINE HOPKINS International Finance Fall 2017\Lesson 5\HW 5 Program Setup" //Load the data use OECDar //tsset the time variable tsset year //****************************** //****************************** //Set up United States variables //****************************** //****************************** //Generate variables in per population terms gen yy_us = y_us/pop15plus_us gen cc_us = c_us/pop15plus_us gen gg_us = g_us/pop15plus_us gen ii_us = i_us/pop15plus_us gen nnx_us = (x_us - im_us)/pop15plus_us gen hh_us = h_us/pop15plus_us //Generate natural logarithm of variables //(remember not to do so for net exports because //this variable can be negative) gen logyy_us = log(yy_us) gen logcc_us = log(cc_us) gen loggg_us = log(gg_us) gen logii_us = log(ii_us) gen loghh_us = log(hh_us) //Generate cyclical components of the data tsfilter hp logyy_us_cc = logyy_us, smooth(6.25) tsfilter hp logcc_us_cc = logcc_us, smooth(6.25) tsfilter hp loggg_us_cc = loggg_us, smooth(6.25) tsfilter hp logii_us_cc = logii_us, smooth(6.25) tsfilter hp nnx_us_cc = nnx_us, smooth(6.25) tsfilter hp loghh_us_cc = loghh_us, smooth(6.25) //************************** //************************** //Set up Australia variables //************************** //************************** //Generate variables in per population terms gen yy_aus = y_aus/pop15plus_aus gen cc_aus = c_aus/pop15plus_aus gen gg_aus = g_aus/pop15plus_aus gen ii_aus = i_aus/pop15plus_aus gen nnx_aus = (x_aus - im_aus)/pop15plus_aus gen hh_aus = h_aus/pop15plus_aus //Generate natural logarithm of variables //(remember not to do so for net exports because //this variable can be negative) gen logyy_aus = log(yy_aus) gen logcc_aus = log(cc_aus) gen loggg_aus = log(gg_aus) gen logii_aus = log(ii_aus) gen loghh_aus = log(hh_aus) //Generate cyclical components of the data tsfilter hp logyy_aus_cc = logyy_aus, smooth(6.25) tsfilter hp logcc_aus_cc = logcc_aus, smooth(6.25) tsfilter hp loggg_aus_cc = loggg_aus, smooth(6.25) tsfilter hp logii_aus_cc = logii_aus, smooth(6.25) tsfilter hp nnx_aus_cc = nnx_aus, smooth(6.25) tsfilter hp loghh_aus_cc = loghh_aus, smooth(6.25) //************************ //************************ //Generate IRFs and Graphs //************************ //************************ //******************* //Output AR processes //******************* //For the United States //Run an AR process quietly var logyy_us_cc //Select the lag order varsoc, maxlag(10) //In all cases for simplicity we'll go with the shortest suggested lag //Implement AR process with optimal lag var logyy_us_cc, lag(1/3) //Check for stability varstable //Generate IRF file irf create L6US, set(L6yUS, replace) step(40) //For the Australia //Run an AR process quietly var logyy_aus_cc //Select the lag order varsoc, maxlag(10) //In all cases for simplicity we'll go with the shortest suggested lag //Implement AR process with optimal lag var logyy_aus_cc, lag(1/7) //Check for stability varstable //Generate IRF file irf create L6Aus, set(L6yAus, replace) step(40) //******************************* //Generate combined output graphs //******************************* clear //Map Stata to where dataset is stored cd "E:\New folder ALL\ONLINE HOPKINS International Finance Fall 2017\Lesson 5\HW 5 Program Setup" //Load the United States output IRF data use L6yUS.irf //Rename the United States IRF rename irf US_yIRF //Label the variable label var US_yIRF "US_yIRF" //Delete all data other than the IRF and the step keep US_yIRF step //Save the dataset save yIRF.dta, replace //Add on this last dataset another country's IRF data merge 1:1 step using L6yAus.irf //Rename the Australia IRF rename irf Aus_yIRF //Label the variable label var Aus_yIRF "Aus_yIRF" //Delete all data other than the IRFs and the stop keep US_yIRF Aus_yIRF step //Save the dataset save yIRF.dta, replace //Move on to combined output graph of output IRFs tsset step tsline US_yIRF Aus_yIRF, name(OutputIRFs, replace)