' Sixth Experiment: A permanent decrease in the bank tax rate

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

' This program generates figures EXP-6.A to EXP-6.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr theta_b_0 = theta_b

' Decrease the bank tax rate permanently
smpl 1960 @last
theta_b = 0.20
smpl @all

' Select the second alternative Scenario 6

REEs_mod.scenario(n, a="_6") "Scenario 6"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr theta_b_6 = theta_b

' and get back shocked variable to its baseline value
theta_b = theta_b_0

' Creates charts from simulated variables

' Creates the chart in Figure EXP-6.A
smpl 1955 2050
graph exp6a.line ((w_6-w_0)/w_0)*100 (((w_6/pd_6)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_6-pd_0)/pd_0)*100
exp6a.options linepat
exp6a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp6a.name(1) Effect upon nominal wages
exp6a.name(2) Effect upon real wages
exp6a.name(3) Effect upon prices
exp6a.addtext(t,just(c),just(c)) Figure 6.a: Effect upon real wage rate, following a permanent decrease in the bank tax rate

show exp6a

' Creates the chart in Figure EXP-6.B
smpl 1955 2050
graph exp6b.line (i_k_6/i_k_0-1)*100 (y_k_6/y_k_0-1)*100 (c_k_6/c_k_0-1)*100
exp6b.options linepat
exp6b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp6b.name(1) Real fixed investment
exp6b.name(2) Real output
exp6b.name(3) Real consumption
exp6b.addtext(t,just(c),just(c)) Figure 6.B: Evolution of consumption, investment and output, following a permanent decrease in the bank tax rate

show exp6b

' Creates the chart in Figure EXP-6.C
smpl 1955 2050
graph exp6c.line (x_k_6/x_k_0-1)*100 (y_k_6/y_k_0-1)*100 (m_k_6/m_k_0-1)*100
exp6c.options linepat
exp6c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp6c.name(1) Real exports
exp6c.name(2) Real output
exp6c.name(3) Real imports
exp6c.addtext(t,just(c),just(c)) Figure 6.C: Evolution of exports, imports and output, following a permanent decrease in the bank tax rate

show exp6c

' Creates the chart in Figure EXP-6.D
smpl 1955 2050
graph exp6d.line ((psbr_6/y_6)-(psbr_0/y_0))*100 ((ca_row_6/y_6)-(ca_row_0/y_0))*100
exp6d.options linepat
exp6d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6d.name(1) PSBR (Government surplus)
exp6d.name(2) Current Account
exp6d.addtext(t,just(c),just(c)) Figure 6.D: Evolution of government surplus and current account to GDP ratios, following a permanent decrease in the bank tax rate

show exp6d

' Creates the chart in Figure EXP-6.E
smpl 1955 2050
graph exp6e.line nirr_6-nirr_0
exp6e.options linepat
exp6e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp6e.name(1) Effect upon net international reserve ratio
exp6e.addtext(t,just(c),just(c)) Figure 6.E: Change in net international reserves ratio, following a permanent decrease in the bank tax rate

show exp6e

' Creates the chart in Figure EXP-6.F
smpl 1955 2050
graph exp6f.line 101 (er_6-er_0+1)*100 99
exp6f.options linepat
exp6f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp6f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp6f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp6f.name(1) Inflationary pressure threshold
exp6f.name(2) Employment rate
exp6f.name(3) Deflationary pressure threshold
exp6f.addtext(t,just(c),just(c)) Figure EXP-6.F: Evolution of employment rate, following a permanent decrease in the bank tax rate

show exp6f

' Creates the chart in Figure EXP-6.G
smpl 1955 2050
graph exp6g.line (td_6/y_6-td_0/y_0) (bcbs_6/y_6-bcbs_0/y_0) (gdh_g_6/y_6-gdh_g_0/y_0)
exp6g.options linepat
exp6g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp6g.name(1) Total Government debt
exp6g.name(2) Central Bank bills
exp6g.name(3) Government deposits at Central Bank
exp6g.addtext(t,just(c),just(c)) Figure 6.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent decrease in the bank tax rate

show exp6g

' Creates the chart in Figure EXP-6.H
smpl 1955 2050
graph exp6h.line ((c_k_6-c_k_0)/y_k_0)*100 ((i_k_6-i_k_0)/y_k_0)*100 ((g_k_6-g_k_0)/y_k_0)*100 ((x_k_6-x_k_0)/y_k_0)*100 -((m_k_6-m_k_0)/y_k_0)*100 ((y_k_6-y_k_0)/y_k_0)*100
exp6h.options linepat
exp6h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp6h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp6h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp6h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp6h.name(1) Real consumption
exp6h.name(2) Real investment
exp6h.name(3) Real government expenditure
exp6h.name(4) Real exports
exp6h.name(5) Real imports
exp6h.name(6) Real GDP
exp6h.addtext(t,just(c),just(c)) Figure 6.H: Contribution to real GDP growth of a permanent decrease in the bank tax rate

show exp6h

' Creates the chart in Figure EXP-6.I
smpl 1955 2050
graph exp6i.line (((w_6/pr_6)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_6-pd_0)/pd_0)*100
exp6i.options linepat
exp6i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6i.name(1) Effect upon wage to productivity ratio
exp6i.name(2) Effect upon prices
exp6i.addtext(t,just(c),just(c)) Figure 6.I: Inflationary effect, following a permanent decrease in the bank tax rate

show exp6i

' Creates the chart in Figure EXP-6.J
smpl 1955 2050
graph exp6j.line (xrendog_6/xrendog_0-1)*100
exp6j.options linepat
exp6j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp6j.name(1) Effect upon shadow exchange rate
exp6j.addtext(t,just(c),just(c)) Figure 6.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent decrease in the bank tax rate

show exp6j

' Creates the chart in Figure EXP-6.K
smpl 1955 2050
graph exp6k.line ((ydr_h_k_e_6-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_6-v_h_k_0)/v_h_k_0)*100
exp6k.options linepat
exp6k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp6k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp6k.name(1) Real effect upon regular disposable income
exp6k.name(2) Real effect upon households’ wealth
exp6k.addtext(t,just(c),just(c)) Figure 6.K: Real (income and wealth) effects upon consumption, following a permanent decrease in the bank tax rate

show exp6k

' Creates the chart in Figure EXP-6.L
smpl 1955 2050
graph exp6l.line (((cg_h_6/pd_6)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp6l.options linepat
exp6l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp6l.name(1) Real effect upon capital gains of households
exp6l.addtext(t,just(c),just(c)) Figure 6.L: Real effect upon capital gains, following a permanent decrease in the bank tax rate

show exp6l