' Eighth Experiment: A five period permanent 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-8.A to EXP-8.I discussed in the Appendix

smpl @all

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

' Increase the rate of interest permanently, as follows:
smpl 1960 @last
rbg_t = 0.0400
smpl 1961 @last
rbg_t = 0.0450
smpl 1962 @last
rbg_t = 0.0500
smpl 1963 @last
rbg_t = 0.0525
smpl 1964 @last
rbg_t = 0.0550
smpl 1965 @last
rbg_t = 0.0600
smpl @all

' Select the second alternative Scenario 8

REEs_mod.scenario(n, a="_8") "Scenario 8"

' 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_8 = 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-8.A
smpl 1955 2050
graph exp8a.line ((w_8-w_0)/w_0)*100 (((w_8/pd_8)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_8-pd_0)/pd_0)*100
exp8a.options linepat
exp8a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp8a.name(1) Effect upon nominal wages
exp8a.name(2) Effect upon real wages
exp8a.name(3) Effect upon prices
exp8a.addtext(t,just(c),just(c)) Graph III.4.25: Effect upon real wage rate, following a permanent increase in the rate of interest on T-Bills

show exp8a

' Creates the chart in Graph EXP-8.B
smpl 1955 2050
graph exp8b.line (i_k_8/i_k_0-1)*100 (y_k_8/y_k_0-1)*100 (c_k_8/c_k_0-1)*100
exp8b.options linepat
exp8b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp8b.name(1) Real fixed investment
exp8b.name(2) Real output
exp8b.name(3) Real consumption
exp8b.addtext(t,just(c),just(c)) Graph 8.B: Evolution of consumption, investment and output, following a permanent increase in the rate of interest on T-Bills

show exp8b

' Creates the chart in Graph EXP-8.C
smpl 1955 2050
graph exp8c.line (x_k_8/x_k_0-1)*100 (y_k_8/y_k_0-1)*100 (m_k_8/m_k_0-1)*100
exp8c.options linepat
exp8c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp8c.name(1) Real exports
exp8c.name(2) Real output
exp8c.name(3) Real imports
exp8c.addtext(t,just(c),just(c)) Graph 8.C: Evolution of exports, imports and output, following a permanent increase in the rate of interest on T-Bills

show exp8c

' Creates the chart in Graph EXP-8.D
smpl 1955 2050
graph exp8d.line ((psbr_8/y_8)-(psbr_0/y_0))*100 ((ca_row_8/y_8)-(ca_row_0/y_0))*100
exp8d.options linepat
exp8d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8d.name(1) PSBR (Government surplus)
exp8d.name(2) Current Account
exp8d.addtext(t,just(c),just(c)) Graph III.4.27: Evolution of government surplus and current account to GDP ratios, following a permanent increase in the rate of interest on T-Bills

show exp8d

' Creates the chart in Graph EXP-8.E
smpl 1955 2050
graph exp8e.line (nirr_8-nirr_0)*12
exp8e.options linepat
exp8e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp8e.name(1) Effect upon net international reserve ratio
exp8e.addtext(t,just(c),just(c)) Graph III.4.26: Change in net international reserves ratio, following a permanent increase in the rate of interest on T-Bills

show exp8e

' Creates the chart in Graph EXP-8.F
smpl 1955 2050
graph exp8f.line 101 (er_8-er_0+1)*100 99
exp8f.options linepat
exp8f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp8f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp8f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp8f.name(1) Inflationary pressure threshold
exp8f.name(2) Employment rate
exp8f.name(3) Deflationary pressure threshold
exp8f.addtext(t,just(c),just(c)) Graph III.4.24: Evolution of employment rate, following a permanent increase in the rate of interest on T-Bills

show exp8f

' Creates the chart in Graph EXP-8.G
smpl 1955 2050
graph exp8g.line (td_8/y_8-td_0/y_0)*100 (bcbs_8/y_8-bcbs_0/y_0)*100 (gdh_g_8/y_8-gdh_g_0/y_0)*100
exp8g.options linepat
exp8g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp8g.name(1) Total Government debt
exp8g.name(2) Central Bank bills
exp8g.name(3) Government deposits at Central Bank
exp8g.addtext(t,just(c),just(c)) Graph III.4.28: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase in the rate of interest on T-Bills

show exp8g

' Creates the chart in Graph EXP-8.H
smpl 1955 2050
graph exp8h.line ((c_k_8-c_k_0)/y_k_0)*100 ((i_k_8-i_k_0)/y_k_0)*100 ((g_k_8-g_k_0)/y_k_0)*100 ((x_k_8-x_k_0)/y_k_0)*100 -((m_k_8-m_k_0)/y_k_0)*100 ((y_k_8-y_k_0)/y_k_0)*100
exp8h.options linepat
exp8h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp8h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp8h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp8h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp8h.name(1) Real consumption
exp8h.name(2) Real investment
exp8h.name(3) Real government expenditure
exp8h.name(4) Real exports
exp8h.name(5) Real imports
exp8h.name(6) Real GDP
exp8h.addtext(t,just(c),just(c)) Graph III.4.23: Contribution to real GDP growth of a permanent increase in the rate of interest on T-Bills

show exp8h

' Creates the chart in Graph EXP-8.I
smpl 1955 2050
graph exp8i.line (((w_8/pr_8)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_8-pd_0)/pd_0)*100
exp8i.options linepat
exp8i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8i.name(1) Effect upon wage to productivity ratio
exp8i.name(2) Effect upon prices
exp8i.addtext(t,just(c),just(c)) Graph 8.I: Inflationary effect, following a permanent increase in the rate of interest on T-Bills

show exp8i

' Creates the chart in Graph EXP-8.J
smpl 1955 2050
graph exp8j.line (xrendog_8/xrendog_0-1)*100
exp8j.options linepat
exp8j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp8j.name(1) Effect upon shadow exchange rate
exp8j.addtext(t,just(c),just(c)) Graph 8.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase in the rate of interest on T-Bills

show exp8j

' Creates the chart in Graph EXP-8.K
smpl 1955 2050
graph exp8k.line ((ydr_h_k_e_8-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_8-v_h_k_0)/v_h_k_0)*100
exp8k.options linepat
exp8k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp8k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp8k.name(1) Real effect upon regular disposable income
exp8k.name(2) Real effect upon households’ wealth
exp8k.addtext(t,just(c),just(c)) Graph 8.K: Real (income and wealth) effects upon consumption, following a permanent increase in the rate of interest on T-Bills

show exp8k

' Creates the chart in Graph EXP-8.L
smpl 1955 2050
graph exp8l.line (((cg_h_8/pd_8)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp8l.options linepat
exp8l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp8l.name(1) Real effect upon capital gains of households
exp8l.addtext(t,just(c),just(c)) Graph 8.L: Real effect upon capital gains, following a permanent increase in the rate of interest on T-Bills

show exp8l