' Third Experiment: A permanent increase in the growth rate of government expenditures

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

' This program generates figures EXP-3.A to EXP-3.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr gr_g_natural_0 = gr_g_natural

' Increase the rate of growth of government expenditures permanently
smpl 1960 @last
gr_g_natural = 0.035
smpl @all

' Select the second alternative Scenario 3

REEs_mod.scenario(n, a="_3") "Scenario 3"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr gr_g_natural_3 = gr_g_natural

' and get back shocked variable to its baseline value
gr_g_natural = gr_g_natural_0

' Creates charts from simulated variables

' Creates the chart in Figure EXP-3.A
smpl 1955 2050
graph exp3a.line ((w_3-w_0)/w_0)*100 (((w_3/pd_3)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_3-pd_0)/pd_0)*100
exp3a.options linepat
exp3a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp3a.name(1) Effect upon nominal wages
exp3a.name(2) Effect upon real wages
exp3a.name(3) Effect upon prices
exp3a.addtext(t,just(c),just(c)) Figure 3.a: Effect upon real wage rate, following a permanent increase in the rate of growth of government expenditures

show exp3a

' Creates the chart in Figure EXP-3.B
smpl 1955 2050
graph exp3b.line (i_k_3/i_k_0-1)*100 (y_k_3/y_k_0-1)*100 (c_k_3/c_k_0-1)*100
exp3b.options linepat
exp3b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp3b.name(1) Real fixed investment
exp3b.name(2) Real output
exp3b.name(3) Real consumption
exp3b.addtext(t,just(c),just(c)) Figure 3.B: Evolution of consumption, investment and output, following a permanent increase in the rate of growth of government expenditures

show exp3b

' Creates the chart in Figure EXP-3.C
smpl 1955 2050
graph exp3c.line (x_k_3/x_k_0-1)*100 (y_k_3/y_k_0-1)*100 (m_k_3/m_k_0-1)*100
exp3c.options linepat
exp3c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp3c.name(1) Real exports
exp3c.name(2) Real output
exp3c.name(3) Real imports
exp3c.addtext(t,just(c),just(c)) Figure 3.C: Evolution of exports, imports and output, following a permanent increase in the rate of growth of government expenditures

show exp3c

' Creates the chart in Figure EXP-3.D
smpl 1955 2050
graph exp3d.line ((psbr_3/y_3)-(psbr_0/y_0))*100 ((ca_row_3/y_3)-(ca_row_0/y_0))*100
exp3d.options linepat
exp3d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3d.name(1) PSBR (Government surplus)
exp3d.name(2) Current Account
exp3d.addtext(t,just(c),just(c)) Figure 3.D: Evolution of government surplus and current account to GDP ratios, following a permanent increase in the rate of growth of government expenditures

show exp3d

' Creates the chart in Figure EXP-3.E
smpl 1955 2050
graph exp3e.line nirr_3-nirr_0
exp3e.options linepat
exp3e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp3e.name(1) Effect upon net international reserve ratio
exp3e.addtext(t,just(c),just(c)) Figure 3.E: Change in net international reserves ratio, following a permanent increase in the rate of growth of government expenditures

show exp3e

' Creates the chart in Figure EXP-3.F
smpl 1955 2050
graph exp3f.line 101 (er_3-er_0+1)*100 99
exp3f.options linepat
exp3f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp3f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp3f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp3f.name(1) Inflationary pressure threshold
exp3f.name(2) Employment rate
exp3f.name(3) Deflationary pressure threshold
exp3f.addtext(t,just(c),just(c)) Figure EXP-3.F: Evolution of employment rate, following a permanent increase in the rate of growth of government expenditures

show exp3f

' Creates the chart in Figure EXP-3.G
smpl 1955 2050
graph exp3g.line (td_3/y_3-td_0/y_0) (bcbs_3/y_3-bcbs_0/y_0) (gdh_g_3/y_3-gdh_g_0/y_0)
exp3g.options linepat
exp3g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp3g.name(1) Total Government debt
exp3g.name(2) Central Bank bills
exp3g.name(3) Government deposits at Central Bank
exp3g.addtext(t,just(c),just(c)) Figure 3.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase in the rate of growth of government expenditures

show exp3g

' Creates the chart in Figure EXP-3.H
smpl 1955 2050
graph exp3h.line ((c_k_3-c_k_0)/y_k_0)*100 ((i_k_3-i_k_0)/y_k_0)*100 ((g_k_3-g_k_0)/y_k_0)*100 ((x_k_3-x_k_0)/y_k_0)*100 -((m_k_3-m_k_0)/y_k_0)*100 ((y_k_3-y_k_0)/y_k_0)*100
exp3h.options linepat
exp3h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp3h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp3h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp3h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp3h.name(1) Real consumption
exp3h.name(2) Real investment
exp3h.name(3) Real government expenditure
exp3h.name(4) Real exports
exp3h.name(5) Real imports
exp3h.name(6) Real GDP
exp3h.addtext(t,just(c),just(c)) Figure 3.H: Contribution to real GDP growth of a permanent increase in the rate of growth of government expenditures

show exp3h

' Creates the chart in Figure EXP-3.I
smpl 1955 2050
graph exp3i.line (((w_3/pr_3)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_3-pd_0)/pd_0)*100
exp3i.options linepat
exp3i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3i.name(1) Effect upon wage to productivity ratio
exp3i.name(2) Effect upon prices
exp3i.addtext(t,just(c),just(c)) Figure 3.I: Inflationary effect, following a permanent increase in the rate of growth of government expenditures

show exp3i

' Creates the chart in Figure EXP-3.J
smpl 1955 2050
graph exp3j.line (xrendog_3/xrendog_0-1)*100
exp3j.options linepat
exp3j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp3j.name(1) Effect upon shadow exchange rate
exp3j.addtext(t,just(c),just(c)) Figure 3.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase in the rate of growth of government expenditures

show exp3j

' Creates the chart in Figure EXP-3.K
smpl 1955 2050
graph exp3k.line ((ydr_h_k_e_3-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_3-v_h_k_0)/v_h_k_0)*100
exp3k.options linepat
exp3k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp3k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp3k.name(1) Real effect upon regular disposable income
exp3k.name(2) Real effect upon households’ wealth
exp3k.addtext(t,just(c),just(c)) Figure 3.K: Real (income and wealth) effects upon consumption, following a permanent increase in the rate of growth of government expenditures

show exp3k

' Creates the chart in Figure EXP-3.L
smpl 1955 2050
graph exp3l.line (((cg_h_3/pd_3)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp3l.options linepat
exp3l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp3l.name(1) Real effect upon capital gains of households
exp3l.addtext(t,just(c),just(c)) Figure 3.L: Real effect upon capital gains, following a permanent increase in the rate of growth of government expenditures

show exp3l