Replicating Meier and Mueller's 2006 JMCB article.

McCullough, B.D. ; Liu, Xiangrong

I. INTRODUCTION

Meier and Mueller (2006) published an article "Fleshing Out the Monetary Transmission Mechanism: Output Composition and the Role of Financial Frictions" in the December 2006 issue of Journal of Money, Credit and Banking. If frictions affect the transmission mechanism, then the effect of Federal Reserve actions on the economy is diluted. The paper finds, however, that frictions are not important and that the transmission of monetary policy is more direct than it would be if frictions were present. To do this, they embed a financial accelerator in a DSGE (dynamic stochastic general equilibrium) model and analyze the effect of financial frictions on the monetary transmission mechanism. The model is very complicated and sophisticated, and perforce the authors cannot completely describe all its details in the article. Only the code can show exactly what the authors have done to achieve their results. Therefore it is especially important that the correct code be available for inspection by other researchers. The only way to tell that the correct code is available for inspection is if the code and data reproduce the published results.

The article contains three tables of results. In accordance with the instructions of the Journal's editors, the authors deposited data and Matlab code in the Journal's archive. We note in passing that both the data and code were in a format that could only be read by Matlab.

While the data and code would run, it produced results that did not agree at all with any of the three tables. Nor were we able to figure out how to modify the code so that it would reproduce the published results. When we reported this to the authors, they quickly provided us with instructions for modifying the code. After we modified code, we were able to reproduce the first two tables, but not the third. When we reported this to the authors, they then provided us with the code that would reproduce the third table.

To assist future researchers, we have used the authors' data and code to produce replication files that will reproduce all three tables of the article, and these files are available at the website of this journal. We also provided a copy to the authors. DSGE models are widely used in economics, and researchers who wish to use DSGE models would find it much easier to re-use the Meier and Mueller code than to write their own.

References

Meier, Andre and Gemot J. Miler (2006), "Fleshing Out the Monetary Transmission Mechanism: Output Composition and the Role of Financial Frications," Journal of Money, Credit, and Banking 38(8), 2099-2134.

B. D. MCCULLOUGH & XIANGRONG LIU

Department of Decision Sciences, Drexel University, Philadelphia