' Fifteenth Experiment: A permanent increase in the real exchange rate elasticity of the demand for imports

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

' This program generates figures EXP-15.A to EXP-15.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr miu1_0 = miu1

' Increase permanently the the real exchange rate elasticity of the demand for imports

smpl 1960 @last
miu1 = 1
smpl @all

' Select the second alternative Scenario 15

REEs_mod.scenario(n, a="_15") "Scenario 15"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr miu1_15 = miu1

' and get back shocked variable to its baseline value
miu1 = miu1_0

' Creates charts from simulated variables

' Creates the chart in Figure EXP-15.A
smpl 1955 2050
graph exp15a.line ((w_15-w_0)/w_0)*100 (((w_15/pd_15)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_15-pd_0)/pd_0)*100
exp15a.options linepat
exp15a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp15a.name(1) Effect upon nominal wages
exp15a.name(2) Effect upon real wages
exp15a.name(3) Effect upon prices
exp15a.addtext(t,just(c),just(c)) Figure 15.a: Effect upon real wage rate, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15a

' Creates the chart in Figure EXP-15.B
smpl 1955 2050
graph exp15b.line (i_k_15/i_k_0-1)*100 (y_k_15/y_k_0-1)*100 (c_k_15/c_k_0-1)*100
exp15b.options linepat
exp15b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp15b.name(1) Real fixed investment
exp15b.name(2) Real output
exp15b.name(3) Real consumption
exp15b.addtext(t,just(c),just(c)) Figure 15.B: Evolution of consumption, investment and output, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15b

' Creates the chart in Figure EXP-15.C
smpl 1955 2050
graph exp15c.line (x_k_15/x_k_0-1)*100 (y_k_15/y_k_0-1)*100 (m_k_15/m_k_0-1)*100
exp15c.options linepat
exp15c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp15c.name(1) Real exports
exp15c.name(2) Real output
exp15c.name(3) Real imports
exp15c.addtext(t,just(c),just(c)) Figure 15.C: Evolution of exports, imports and output, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15c

' Creates the chart in Figure EXP-15.D
smpl 1955 2050
graph exp15d.line ((psbr_15/y_15)-(psbr_0/y_0))*100 ((ca_row_15/y_15)-(ca_row_0/y_0))*100
exp15d.options linepat
exp15d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15d.name(1) PSBR (Government surplus)
exp15d.name(2) Current Account
exp15d.addtext(t,just(c),just(c)) Figure 15.D: Evolution of government surplus and current account to GDP ratios, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15d

' Creates the chart in Figure EXP-15.E
smpl 1955 2050
graph exp15e.line nirr_15-nirr_0
exp15e.options linepat
exp15e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp15e.name(1) Effect upon net international reserve ratio
exp15e.addtext(t,just(c),just(c)) Figure 15.E: Change in net international reserves ratio, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15e

' Creates the chart in Figure EXP-15.F
smpl 1955 2050
graph exp15f.line 101 (er_15-er_0+1)*100 99
exp15f.options linepat
exp15f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp15f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp15f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp15f.name(1) Inflationary pressure threshold
exp15f.name(2) Employment rate
exp15f.name(3) Deflationary pressure threshold
exp15f.addtext(t,just(c),just(c)) Figure EXP-15.F: Evolution of employment rate, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15f

' Creates the chart in Figure EXP-15.G
smpl 1955 2050
graph exp15g.line (td_15/y_15-td_0/y_0) (bcbs_15/y_15-bcbs_0/y_0) (gdh_g_15/y_15-gdh_g_0/y_0)
exp15g.options linepat
exp15g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp15g.name(1) Total Government debt
exp15g.name(2) Central Bank bills
exp15g.name(3) Government deposits at Central Bank
exp15g.addtext(t,just(c),just(c)) Figure 15.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15g

' Creates the chart in Figure EXP-15.H
smpl 1955 2050
graph exp15h.line ((c_k_15-c_k_0)/y_k_0)*100 ((i_k_15-i_k_0)/y_k_0)*100 ((g_k_15-g_k_0)/y_k_0)*100 ((x_k_15-x_k_0)/y_k_0)*100 -((m_k_15-m_k_0)/y_k_0)*100 ((y_k_15-y_k_0)/y_k_0)*100
exp15h.options linepat
exp15h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp15h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp15h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp15h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp15h.name(1) Real consumption
exp15h.name(2) Real investment
exp15h.name(3) Real government expenditure
exp15h.name(4) Real exports
exp15h.name(5) Real imports
exp15h.name(6) Real GDP
exp15h.addtext(t,just(c),just(c)) Figure 15.H: Contribution to real GDP growth of a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15h

' Creates the chart in Figure EXP-15.I
smpl 1955 2050
graph exp15i.line (((w_15/pr_15)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_15-pd_0)/pd_0)*100
exp15i.options linepat
exp15i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15i.name(1) Effect upon wage to productivity ratio
exp15i.name(2) Effect upon prices
exp15i.addtext(t,just(c),just(c)) Figure 15.I: Inflationary effect, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15i

' Creates the chart in Figure EXP-15.J
smpl 1955 2050
graph exp15j.line (xrendog_15/xrendog_0-1)*100
exp15j.options linepat
exp15j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp15j.name(1) Effect upon shadow exchange rate
exp15j.addtext(t,just(c),just(c)) Figure 15.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15j

' Creates the chart in Figure EXP-15.K
smpl 1955 2050
graph exp15k.line ((ydr_h_k_e_15-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_15-v_h_k_0)/v_h_k_0)*100
exp15k.options linepat
exp15k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp15k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp15k.name(1) Real effect upon regular disposable income
exp15k.name(2) Real effect upon households’ wealth
exp15k.addtext(t,just(c),just(c)) Figure 15.K: Real (income and wealth) effects upon consumption, following a permanent increase in the real exchange rate elasticity of the demand for imports

show exp15k

' Creates the chart in Figure EXP-15.L
smpl 1955 2050
graph exp15l.line (((cg_h_15/pd_15)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp15l.options linepat
exp15l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp15l.name(1) Real effect upon capital gains of households
exp15l.addtext(t,just(c),just(c)) Figure 15.L: Real effect upon capital gains, following permanent increase in the real exchange rate elasticity of the demand for imports

show exp15l