' Seventh Experiment: A one-period increase in the rate of interest on T-Bills

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

' This program generates Graphs EXP-7.A to EXP-7.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr rbg_t_0 = rbg_t

' Increase in the reference rate for one year
smpl 1960 1960
rbg_t = 0.065
smpl @all

' Select the second alternative Scenario 7

REEs_mod.scenario(n, a="_7") "Scenario 7"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr rbg_t_7 = rbg_t

' and get back shocked variable to its baseline value
rbg_t = rbg_t_0

' Creates charts from simulated variables

' Creates the chart in Graph EXP-7.A
smpl 1955 2050
graph exp7a.line ((w_7-w_0)/w_0)*100 (((w_7/pd_7)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_7-pd_0)/pd_0)*100
exp7a.options linepat
exp7a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp7a.name(1) Effect upon nominal wages
exp7a.name(2) Effect upon real wages
exp7a.name(3) Effect upon prices
exp7a.addtext(t,just(c),just(c)) Graph 7.a: Effect upon real wage rate, following a one-period increase in the rate of interest on T-Bills

show exp7a

' Creates the chart in Graph EXP-7.B
smpl 1955 2050
graph exp7b.line (i_k_7/i_k_0-1)*100 (y_k_7/y_k_0-1)*100 (c_k_7/c_k_0-1)*100
exp7b.options linepat
exp7b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp7b.name(1) Real fixed investment
exp7b.name(2) Real output
exp7b.name(3) Real consumption
exp7b.addtext(t,just(c),just(c)) Graph 7.B: Evolution of consumption, investment and output, following a one-period increase in the rate of interest on T-Bills

show exp7b

' Creates the chart in Graph EXP-7.C
smpl 1955 2050
graph exp7c.line (x_k_7/x_k_0-1)*100 (y_k_7/y_k_0-1)*100 (m_k_7/m_k_0-1)*100
exp7c.options linepat
exp7c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp7c.name(1) Real exports
exp7c.name(2) Real output
exp7c.name(3) Real imports
exp7c.addtext(t,just(c),just(c)) Graph 7.C: Evolution of exports, imports and output, following a one-period increase in the rate of interest on T-Bills

show exp7c

' Creates the chart in Graph EXP-7.D
smpl 1955 2050
graph exp7d.line ((psbr_7/y_7)-(psbr_0/y_0))*100 ((ca_row_7/y_7)-(ca_row_0/y_0))*100
exp7d.options linepat
exp7d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7d.name(1) PSBR (Government surplus)
exp7d.name(2) Current Account
exp7d.addtext(t,just(c),just(c)) Graph 7.D: Evolution of government surplus and current account to GDP ratios, following a one-period increase in the rate of interest on T-Bills

show exp7d

' Creates the chart in Graph EXP-7.E
smpl 1955 2050
graph exp7e.line nirr_7-nirr_0
exp7e.options linepat
exp7e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp7e.name(1) Effect upon net international reserve ratio
exp7e.addtext(t,just(c),just(c)) Graph 7.E: Change in net international reserves ratio, following a one-period increase in the rate of interest on T-Bills

show exp7e

' Creates the chart in Graph EXP-7.F
smpl 1955 2050
graph exp7f.line 101 (er_7-er_0+1)*100 99
exp7f.options linepat
exp7f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp7f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp7f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp7f.name(1) Inflationary pressure threshold
exp7f.name(2) Employment rate
exp7f.name(3) Deflationary pressure threshold
exp7f.addtext(t,just(c),just(c)) Graph EXP-7.F: Evolution of employment rate, following a one-period increase in the rate of interest on T-Bills

show exp7f

' Creates the chart in Graph EXP-7.G
smpl 1955 2050
graph exp7g.line (td_7/y_7-td_0/y_0) (bcbs_7/y_7-bcbs_0/y_0) (gdh_g_7/y_7-gdh_g_0/y_0)
exp7g.options linepat
exp7g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp7g.name(1) Total Government debt
exp7g.name(2) Central Bank bills
exp7g.name(3) Government deposits at Central Bank
exp7g.addtext(t,just(c),just(c)) Graph 7.G: Evolution of government debt, central bank bills, and government deposits at CB, following a one-period increase in the rate of interest on T-Bills

show exp7g

' Creates the chart in Graph EXP-7.H
smpl 1955 2050
graph exp7h.line ((c_k_7-c_k_0)/y_k_0)*100 ((i_k_7-i_k_0)/y_k_0)*100 ((g_k_7-g_k_0)/y_k_0)*100 ((x_k_7-x_k_0)/y_k_0)*100 -((m_k_7-m_k_0)/y_k_0)*100 ((y_k_7-y_k_0)/y_k_0)*100
exp7h.options linepat
exp7h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp7h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp7h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp7h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp7h.name(1) Real consumption
exp7h.name(2) Real investment
exp7h.name(3) Real government expenditure
exp7h.name(4) Real exports
exp7h.name(5) Real imports
exp7h.name(6) Real GDP
exp7h.addtext(t,just(c),just(c)) Graph 7.H: Contribution to real GDP growth of a one-period increase in the rate of interest on T-Bills

show exp7h

' Creates the chart in Graph EXP-7.I
smpl 1955 2050
graph exp7i.line (((w_7/pr_7)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_7-pd_0)/pd_0)*100
exp7i.options linepat
exp7i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7i.name(1) Effect upon wage to productivity ratio
exp7i.name(2) Effect upon prices
exp7i.addtext(t,just(c),just(c)) Graph 7.I: Inflationary effect, following a one-period increase in the rate of interest on T-Bills

show exp7i

' Creates the chart in Graph EXP-7.J
smpl 1955 2050
graph exp7j.line (xrendog_7/xrendog_0-1)*100
exp7j.options linepat
exp7j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp7j.name(1) Effect upon shadow exchange rate
exp7j.addtext(t,just(c),just(c)) Graph 7.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a one-period increase in the rate of interest on T-Bills

show exp7j

' Creates the chart in Graph EXP-7.K
smpl 1955 2050
graph exp7k.line ((ydr_h_k_e_7-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_7-v_h_k_0)/v_h_k_0)*100
exp7k.options linepat
exp7k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp7k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp7k.name(1) Real effect upon regular disposable income
exp7k.name(2) Real effect upon households’ wealth
exp7k.addtext(t,just(c),just(c)) Graph 7.K: Real (income and wealth) effects upon consumption, following a one-period increase in the rate of interest on T-Bills

show exp7k

' Creates the chart in Graph EXP-7.L
smpl 1955 2050
graph exp7l.line (((cg_h_7/pd_7)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp7l.options linepat
exp7l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp7l.name(1) Real effect upon capital gains of households
exp7l.addtext(t,just(c),just(c)) Graph 7.L: Real effect upon capital gains, following a one-period increase in the rate of interest on T-Bills

show exp7l