' Twelveth Experiment: A a decrease in the ROW’s rate of price inflation

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

' This program generates figures EXP-12.A to EXP-12.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr pi_row_0 = pi_row

' Increase the ROW’s rate of price inflation
smpl 1960 @last
pi_row = 0.01
smpl @all

' Select the second alternative Scenario 12

REEs_mod.scenario(n, a="_12") "Scenario 12"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr pi_row_12 = pi_row

' and get back shocked variable to its baseline value
pi_row = pi_row_0

' Creates charts from simulated variables

' Creates the chart in Figure EXP-12.A
smpl 1955 2050
graph exp12a.line ((w_12-w_0)/w_0)*100 (((w_12/pd_12)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_12-pd_0)/pd_0)*100
exp12a.options linepat
exp12a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp12a.name(1) Effect upon nominal wages
exp12a.name(2) Effect upon real wages
exp12a.name(3) Effect upon prices
exp12a.addtext(t,just(c),just(c)) Figure 12.a: Effect upon real wage rate, following a decrease in the ROW’s rate of price inflation

show exp12a

' Creates the chart in Figure EXP-12.B
smpl 1955 2050
graph exp12b.line (i_k_12/i_k_0-1)*100 (y_k_12/y_k_0-1)*100 (c_k_12/c_k_0-1)*100
exp12b.options linepat
exp12b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp12b.name(1) Real fixed investment
exp12b.name(2) Real output
exp12b.name(3) Real consumption
exp12b.addtext(t,just(c),just(c)) Figure 12.B: Evolution of consumption, investment and output, following a decrease in the ROW’s rate of price inflation

show exp12b

' Creates the chart in Figure EXP-12.C
smpl 1955 2050
graph exp12c.line (x_k_12/x_k_0-1)*100 (y_k_12/y_k_0-1)*100 (m_k_12/m_k_0-1)*100
exp12c.options linepat
exp12c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp12c.name(1) Real exports
exp12c.name(2) Real output
exp12c.name(3) Real imports
exp12c.addtext(t,just(c),just(c)) Figure 12.C: Evolution of exports, imports and output, following a decrease in the ROW’s rate of price inflation

show exp12c

' Creates the chart in Figure EXP-12.D
smpl 1955 2050
graph exp12d.line ((psbr_12/y_12)-(psbr_0/y_0))*100 ((ca_row_12/y_12)-(ca_row_0/y_0))*100
exp12d.options linepat
exp12d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12d.name(1) PSBR (Government surplus)
exp12d.name(2) Current Account
exp12d.addtext(t,just(c),just(c)) Figure 12.D: Evolution of government surplus and current account to GDP ratios, following a decrease in the ROW’s rate of price inflation

show exp12d

' Creates the chart in Figure EXP-12.E
smpl 1955 2050
graph exp12e.line nirr_12-nirr_0
exp12e.options linepat
exp12e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp12e.name(1) Effect upon net international reserve ratio
exp12e.addtext(t,just(c),just(c)) Figure 12.E: Change in net international reserves ratio, following a decrease in the ROW’s rate of price inflation

show exp12e

' Creates the chart in Figure EXP-12.F
smpl 1955 2050
graph exp12f.line 101 (er_12-er_0+1)*100 99
exp12f.options linepat
exp12f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp12f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp12f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp12f.name(1) Inflationary pressure threshold
exp12f.name(2) Employment rate
exp12f.name(3) Deflationary pressure threshold
exp12f.addtext(t,just(c),just(c)) Figure EXP-12.F: Evolution of employment rate, following a decrease in the ROW’s rate of price inflation

show exp12f

' Creates the chart in Figure EXP-12.G
smpl 1955 2050
graph exp12g.line (td_12/y_12-td_0/y_0) (bcbs_12/y_12-bcbs_0/y_0) (gdh_g_12/y_12-gdh_g_0/y_0)
exp12g.options linepat
exp12g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp12g.name(1) Total Government debt
exp12g.name(2) Central Bank bills
exp12g.name(3) Government deposits at Central Bank
exp12g.addtext(t,just(c),just(c)) Figure 12.G: Evolution of government debt, central bank bills, and government deposits at CB, following a decrease in the ROW’s rate of price inflation

show exp12g

' Creates the chart in Figure EXP-12.H
smpl 1955 2050
graph exp12h.line ((c_k_12-c_k_0)/y_k_0)*100 ((i_k_12-i_k_0)/y_k_0)*100 ((g_k_12-g_k_0)/y_k_0)*100 ((x_k_12-x_k_0)/y_k_0)*100 -((m_k_12-m_k_0)/y_k_0)*100 ((y_k_12-y_k_0)/y_k_0)*100
exp12h.options linepat
exp12h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp12h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp12h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp12h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp12h.name(1) Real consumption
exp12h.name(2) Real investment
exp12h.name(3) Real government expenditure
exp12h.name(4) Real exports
exp12h.name(5) Real imports
exp12h.name(6) Real GDP
exp12h.addtext(t,just(c),just(c)) Figure 12.H: Contribution to real GDP growth of a decrease in the ROW’s rate of price inflation

show exp12h

' Creates the chart in Figure EXP-12.I
smpl 1955 2050
graph exp12i.line (((w_12/pr_12)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_12-pd_0)/pd_0)*100
exp12i.options linepat
exp12i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12i.name(1) Effect upon wage to productivity ratio
exp12i.name(2) Effect upon prices
exp12i.addtext(t,just(c),just(c)) Figure 12.I: Inflationary effect, following a decrease in the ROW’s rate of price inflation

show exp12i

' Creates the chart in Figure EXP-12.J
smpl 1955 2050
graph exp12j.line (xrendog_12/xrendog_0-1)*100
exp12j.options linepat
exp12j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp12j.name(1) Effect upon shadow exchange rate
exp12j.addtext(t,just(c),just(c)) Figure 12.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a decrease in the ROW’s rate of price inflation

show exp12j

' Creates the chart in Figure EXP-12.K
smpl 1955 2050
graph exp12k.line ((ydr_h_k_e_12-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_12-v_h_k_0)/v_h_k_0)*100
exp12k.options linepat
exp12k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp12k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp12k.name(1) Real effect upon regular disposable income
exp12k.name(2) Real effect upon households’ wealth
exp12k.addtext(t,just(c),just(c)) Figure 12.K: Real (income and wealth) effects upon consumption, following a decrease in the ROW’s rate of price inflation

show exp12k

' Creates the chart in Figure EXP-12.L
smpl 1955 2050
graph exp12l.line (((cg_h_12/pd_12)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp12l.options linepat
exp12l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp12l.name(1) Real effect upon capital gains of households
exp12l.addtext(t,just(c),just(c)) Figure 12.L: Real effect upon capital gains, following a decrease in the ROW’s rate of price inflation

show exp12l