' Eleventh Experiment: A permanent increase in the propensity to consume out of wealth

' Before running this program, run first REEs_mod so as to create a workfile and a baseline solution

' This program generates figures EXP-11.A to EXP-11.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr alpha2_0 = alpha2

' Increase the propensity to consume out of wealth
smpl 1960 @last
alpha2 = 0.070
smpl @all

' Select the second alternative Scenario 11

REEs_mod.scenario(n, a="_11") "Scenario 11"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr alpha2_11 = alpha2

' and get back shocked variable to its baseline value
alpha2 = alpha2_0

' Creates charts from simulated variables

' Creates the chart in Figure EXP-11.A
smpl 1955 2050
graph exp11a.line ((w_11-w_0)/w_0)*100 (((w_11/pd_11)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_11-pd_0)/pd_0)*100
exp11a.options linepat
exp11a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp11a.name(1) Effect upon nominal wages
exp11a.name(2) Effect upon real wages
exp11a.name(3) Effect upon prices
exp11a.addtext(t,just(c),just(c)) Figure 11.a: Effect upon real wage rate, following a permanent increase in the propensity to consume out of wealth

show exp11a

' Creates the chart in Figure EXP-11.B
smpl 1955 2050
graph exp11b.line (i_k_11/i_k_0-1)*100 (y_k_11/y_k_0-1)*100 (c_k_11/c_k_0-1)*100
exp11b.options linepat
exp11b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp11b.name(1) Real fixed investment
exp11b.name(2) Real output
exp11b.name(3) Real consumption
exp11b.addtext(t,just(c),just(c)) Figure 11.B: Evolution of consumption, investment and output, following a permanent increase in the propensity to consume out of wealth

show exp11b

' Creates the chart in Figure EXP-11.C
smpl 1955 2050
graph exp11c.line (x_k_11/x_k_0-1)*100 (y_k_11/y_k_0-1)*100 (m_k_11/m_k_0-1)*100
exp11c.options linepat
exp11c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp11c.name(1) Real exports
exp11c.name(2) Real output
exp11c.name(3) Real imports
exp11c.addtext(t,just(c),just(c)) Figure 11.C: Evolution of exports, imports and output, following a permanent increase in the propensity to consume out of wealth

show exp11c

' Creates the chart in Figure EXP-11.D
smpl 1955 2050
graph exp11d.line ((psbr_11/y_11)-(psbr_0/y_0))*100 ((ca_row_11/y_11)-(ca_row_0/y_0))*100
exp11d.options linepat
exp11d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11d.name(1) PSBR (Government surplus)
exp11d.name(2) Current Account
exp11d.addtext(t,just(c),just(c)) Figure 11.D: Evolution of government surplus and current account to GDP ratios, following a permanent increase in the propensity to consume out of wealth

show exp11d

' Creates the chart in Figure EXP-11.E
smpl 1955 2050
graph exp11e.line nirr_11-nirr_0
exp11e.options linepat
exp11e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp11e.name(1) Effect upon net international reserve ratio
exp11e.addtext(t,just(c),just(c)) Figure 11.E: Change in net international reserves ratio, following a permanent increase in the propensity to consume out of wealth

show exp11e

' Creates the chart in Figure EXP-11.F
smpl 1955 2050
graph exp11f.line 101 (er_11-er_0+1)*100 99
exp11f.options linepat
exp11f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp11f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp11f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp11f.name(1) Inflationary pressure threshold
exp11f.name(2) Employment rate
exp11f.name(3) Deflationary pressure threshold
exp11f.addtext(t,just(c),just(c)) Figure EXP-11.F: Evolution of employment rate, following a permanent increase in the propensity to consume out of wealth

show exp11f

' Creates the chart in Figure EXP-11.G
smpl 1955 2050
graph exp11g.line (td_11/y_11-td_0/y_0) (bcbs_11/y_11-bcbs_0/y_0) (gdh_g_11/y_11-gdh_g_0/y_0)
exp11g.options linepat
exp11g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp11g.name(1) Total Government debt
exp11g.name(2) Central Bank bills
exp11g.name(3) Government deposits at Central Bank
exp11g.addtext(t,just(c),just(c)) Figure 11.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase in the propensity to consume out of wealth

show exp11g

' Creates the chart in Figure EXP-11.H
smpl 1955 2050
graph exp11h.line ((c_k_11-c_k_0)/y_k_0)*100 ((i_k_11-i_k_0)/y_k_0)*100 ((g_k_11-g_k_0)/y_k_0)*100 ((x_k_11-x_k_0)/y_k_0)*100 -((m_k_11-m_k_0)/y_k_0)*100 ((y_k_11-y_k_0)/y_k_0)*100
exp11h.options linepat
exp11h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp11h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp11h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp11h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp11h.name(1) Real consumption
exp11h.name(2) Real investment
exp11h.name(3) Real government expenditure
exp11h.name(4) Real exports
exp11h.name(5) Real imports
exp11h.name(6) Real GDP
exp11h.addtext(t,just(c),just(c)) Figure 11.H: Contribution to real GDP growth of an increase in the propensity to consume out of wealth

show exp11h

' Creates the chart in Figure EXP-11.I
smpl 1955 2050
graph exp11i.line (((w_11/pr_11)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_11-pd_0)/pd_0)*100
exp11i.options linepat
exp11i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11i.name(1) Effect upon wage to productivity ratio
exp11i.name(2) Effect upon prices
exp11i.addtext(t,just(c),just(c)) Figure 11.I: Inflationary effect, following a permanent increase in the propensity to consume out of wealth

show exp11i

' Creates the chart in Figure EXP-11.J
smpl 1955 2050
graph exp11j.line (xrendog_11/xrendog_0-1)*100
exp11j.options linepat
exp11j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp11j.name(1) Effect upon shadow exchange rate
exp11j.addtext(t,just(c),just(c)) Figure 11.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase in the propensity to consume out of wealth

show exp11j

' Creates the chart in Figure EXP-11.K
smpl 1955 2050
graph exp11k.line ((ydr_h_k_e_11-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_11-v_h_k_0)/v_h_k_0)*100
exp11k.options linepat
exp11k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp11k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp11k.name(1) Real effect upon regular disposable income
exp11k.name(2) Real effect upon households’ wealth
exp11k.addtext(t,just(c),just(c)) Figure 11.K: Real (income and wealth) effects upon consumption, following a permanent increase in the propensity to consume out of wealth

show exp11k

' Creates the chart in Figure EXP-11.L
smpl 1955 2050
graph exp11l.line (((cg_h_11/pd_11)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp11l.options linepat
exp11l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp11l.name(1) Real effect upon capital gains of households
exp11l.addtext(t,just(c),just(c)) Figure 11.L: Real effect upon capital gains, following a permanent increase in the propensity to consume out of wealth

show exp11l