🌍 Week 4 Homework — Feedback

Student: Iusupova Farangizbegim
Assignment: Extended IS–LM and Cholesky Decomposition

✅ Overall Assessment

Result: ✅ More than 50% Correct

The student demonstrates good code organization and effort, implementing most components with clear structure and detailed comments. However, there is a critical error in the A matrix construction that leads to economically incorrect results (negative interest rates). The Cholesky decomposition and stochastic simulation are implemented correctly, but the IS-LM system setup contains fundamental mistakes.

🔍 Task-by-Task Check

Task Description Status Notes
1 Parameter setup & system definition ❌ Critical Error: A matrix is [1, alpha; beta, -gamma] instead of [1, alpha; -beta, gamma]. Missing negative sign on beta. b vector is correct.
2 Equilibrium solution ⚠️ Solves system correctly given the wrong A matrix, but results are economically incorrect (negative interest rates). Good output formatting.
3 Comparative statics setup ✅ Correctly creates G grid using linspace(0, 200, 50), loops through values, and stores results in Y_grid and i_grid arrays.
4 Plotting comparative statics ✅ Creates proper subplots for Y vs G and i vs G. Shows relationships correctly given the wrong system. No figure saving in code.
5 Cholesky decomposition ✅ Correctly defines Sigma matrix, checks eigenvalues > 0, computes L using chol(Sigma, 'lower'), and verifies decomposition.
6 Stochastic simulation setup ✅ Correctly generates u ~ N(0,I) with proper dimensions (2×10000), transforms to eps = L*u, and sets random seed (123).
7 Equilibrium distribution analysis ✅ Correctly computes empirical and theoretical covariances. Includes transmission matrix analysis.
8 Visualization of stochastic results ✅ Creates scatter plot correctly with proper labels, styling, and includes deterministic equilibrium point. No figure saving in code.

📈 Technical Implementation

  • Critical Matrix Error: A matrix [1, alpha; beta, -gamma] should be [1, alpha; -beta, gamma] (missing negative sign on beta)
  • Code Structure: Good organization with clear sections and detailed comments
  • Numerical Methods: Uses correct A\b method and efficient A^(-1) computation
  • G Grid: Uses linspace(0, 200, 50) which is economically reasonable
  • Figure Management: Missing saveas() commands in code
  • Advanced Features: Includes transmission matrix analysis and theoretical vs empirical covariance comparison

💬 Style & Clarity

  • Code Quality: Good structure with clear section headers and detailed comments
  • Variable Naming: Logical names (G_grid, Y_grid, i_grid, x_deterministic)
  • Comments: Detailed comments explaining each step and economic interpretation
  • Output: Good use of fprintf with clear formatting
  • Organization: Clear separation into three main parts with progress indicators

📊 Visual Output Assessment

Please remember to save the figures in the Figures folder!

Figure 1: week4_IS_LM.png ⚠️

  • Layout: Two subplots stacked vertically (correct format)
  • Relationships: Shows relationships, but interest rates are negative (economically wrong)
  • Labels: Proper axis labels and titles
  • Styling: Clean appearance with grid
  • Issue: Negative interest rates indicate fundamental matrix errors

Figure 2: week4_scatter.png ⚠️

  • Distribution: Scatter plot showing correlated shocks
  • Correlation: Shows correlation structure correctly
  • Styling: Good use of MarkerFaceAlpha and includes deterministic equilibrium point
  • Saving: No figure saving in code
  • Issue: Results based on incorrect underlying system due to matrix error

✅ Suggestions for Improvement

  1. Critical: Fix A matrix to [1, alpha; -beta, gamma] instead of [1, alpha; beta, -gamma]
  2. Important: Add saveas() commands to save figures automatically
  3. Style: Consider adding semicolons on assignment lines to reduce command window output
  4. Verification: Check that results are economically reasonable (positive interest rates, correct slopes)

🎯 Summary

Good implementation with critical economic error. The student demonstrates solid programming skills, clear code organization, and attention to detail. However, the missing negative sign in the A matrix prevents correct economic interpretation of the IS-LM system, leading to negative interest rates.

Grade Level: ✅ More than 50% Correct (6/8 tasks fully correct, 1/8 partially correct, 1/8 incorrect)