' Fourteenth Experiment: A permanent increase in the ROW’s imports demand-real exchange rate elasticity

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

' This program generates figures EXP-14.A to EXP-14.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr ye1_0 = ye1

' Increase permanently the ROW’s imports demand-real exchange rate elasticity
smpl 1960 @last
ye1 = 1
smpl @all

' Select the second alternative Scenario 14

REEs_mod.scenario(n, a="_14") "Scenario 14"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr ye1_14 = ye1

' and get back shocked variable to its baseline value
ye1 = ye1_0

' Creates charts from simulated variables

' Creates the chart in Figure EXP-14.A
smpl 1955 2050
graph exp14a.line ((w_14-w_0)/w_0)*100 (((w_14/pd_14)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_14-pd_0)/pd_0)*100
exp14a.options linepat
exp14a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp14a.name(1) Effect upon nominal wages
exp14a.name(2) Effect upon real wages
exp14a.name(3) Effect upon prices
exp14a.addtext(t,just(c),just(c)) Figure 14.a: Effect upon real wage rate, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14a

' Creates the chart in Figure EXP-14.B
smpl 1955 2050
graph exp14b.line (i_k_14/i_k_0-1)*100 (y_k_14/y_k_0-1)*100 (c_k_14/c_k_0-1)*100
exp14b.options linepat
exp14b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp14b.name(1) Real fixed investment
exp14b.name(2) Real output
exp14b.name(3) Real consumption
exp14b.addtext(t,just(c),just(c)) Figure 14.B: Evolution of consumption, investment and output, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14b

' Creates the chart in Figure EXP-14.C
smpl 1955 2050
graph exp14c.line (x_k_14/x_k_0-1)*100 (y_k_14/y_k_0-1)*100 (m_k_14/m_k_0-1)*100
exp14c.options linepat
exp14c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp14c.name(1) Real exports
exp14c.name(2) Real output
exp14c.name(3) Real imports
exp14c.addtext(t,just(c),just(c)) Figure 14.C: Evolution of exports, imports and output, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14c

' Creates the chart in Figure EXP-14.D
smpl 1955 2050
graph exp14d.line ((psbr_14/y_14)-(psbr_0/y_0))*100 ((ca_row_14/y_14)-(ca_row_0/y_0))*100
exp14d.options linepat
exp14d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14d.name(1) PSBR (Government surplus)
exp14d.name(2) Current Account
exp14d.addtext(t,just(c),just(c)) Figure 14.D: Evolution of government surplus and current account to GDP ratios, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14d

' Creates the chart in Figure EXP-14.E
smpl 1955 2050
graph exp14e.line nirr_14-nirr_0
exp14e.options linepat
exp14e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp14e.name(1) Effect upon net international reserve ratio
exp14e.addtext(t,just(c),just(c)) Figure 14.E: Change in net international reserves ratio, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14e

' Creates the chart in Figure EXP-14.F
smpl 1955 2050
graph exp14f.line 101 (er_14-er_0+1)*100 99
exp14f.options linepat
exp14f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp14f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp14f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp14f.name(1) Inflationary pressure threshold
exp14f.name(2) Employment rate
exp14f.name(3) Deflationary pressure threshold
exp14f.addtext(t,just(c),just(c)) Figure EXP-14.F: Evolution of employment rate, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14f

' Creates the chart in Figure EXP-14.G
smpl 1955 2050
graph exp14g.line (td_14/y_14-td_0/y_0) (bcbs_14/y_14-bcbs_0/y_0) (gdh_g_14/y_14-gdh_g_0/y_0)
exp14g.options linepat
exp14g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp14g.name(1) Total Government debt
exp14g.name(2) Central Bank bills
exp14g.name(3) Government deposits at Central Bank
exp14g.addtext(t,just(c),just(c)) Figure 14.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14g

' Creates the chart in Figure EXP-14.H
smpl 1955 2050
graph exp14h.line ((c_k_14-c_k_0)/y_k_0)*100 ((i_k_14-i_k_0)/y_k_0)*100 ((g_k_14-g_k_0)/y_k_0)*100 ((x_k_14-x_k_0)/y_k_0)*100 -((m_k_14-m_k_0)/y_k_0)*100 ((y_k_14-y_k_0)/y_k_0)*100
exp14h.options linepat
exp14h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp14h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp14h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp14h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp14h.name(1) Real consumption
exp14h.name(2) Real investment
exp14h.name(3) Real government expenditure
exp14h.name(4) Real exports
exp14h.name(5) Real imports
exp14h.name(6) Real GDP
exp14h.addtext(t,just(c),just(c)) Figure 14.H: Contribution to real GDP growth of an increase in the ROW’s imports demand-real exchange rate elasticity

show exp14h

' Creates the chart in Figure EXP-14.I
smpl 1955 2050
graph exp14i.line (((w_14/pr_14)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_14-pd_0)/pd_0)*100
exp14i.options linepat
exp14i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14i.name(1) Effect upon wage to productivity ratio
exp14i.name(2) Effect upon prices
exp14i.addtext(t,just(c),just(c)) Figure 14.I: Inflationary effect, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14i

' Creates the chart in Figure EXP-14.J
smpl 1955 2050
graph exp14j.line (xrendog_14/xrendog_0-1)*100
exp14j.options linepat
exp14j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp14j.name(1) Effect upon shadow exchange rate
exp14j.addtext(t,just(c),just(c)) Figure 14.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14j

' Creates the chart in Figure EXP-14.K
smpl 1955 2050
graph exp14k.line ((ydr_h_k_e_14-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_14-v_h_k_0)/v_h_k_0)*100
exp14k.options linepat
exp14k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp14k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp14k.name(1) Real effect upon regular disposable income
exp14k.name(2) Real effect upon households’ wealth
exp14k.addtext(t,just(c),just(c)) Figure 14.K: Real (income and wealth) effects upon consumption, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14k

' Creates the chart in Figure EXP-14.L
smpl 1955 2050
graph exp14l.line (((cg_h_14/pd_14)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp14l.options linepat
exp14l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp14l.name(1) Real effect upon capital gains of households
exp14l.addtext(t,just(c),just(c)) Figure 14.L: Real effect upon capital gains, following a permanent increase in the ROW’s imports demand-real exchange rate elasticity

show exp14l