This directory contains an alternative .mod file for the Smets and
Wouters (2007) model where we have put an AR(1) preference shock in 
the flexible wage equation and set the wage markup shock in the sticky 
wage equation equal to this AR(1) shock plus an iid markup shock.
This formulation is used by Levin et al. in their Macro Annual.
See also the comment by Walsh who plots a figure similar to our
Figure 6.

For more details, compare usmodel_pshk.mod with ../sw_orig/usmodel.mod.  
Both codes are input files to DYNARE, which is software written 
by Michel Juillard.  We used DYNARE version 3.05.