' Seventeenth Experiment: A permanent increase in foreign currency liquidity preference due to an equivalent decrease in the preference for local currency bonds
' Before running this program, run first REEs_mod so as to create a workfile and a baseline solution
' This program generates figures EXP-17.A to EXP-17.I discussed in the Appendix
smpl @all
' Store original value of shocked parameter to baseline
genr lambda90_0 = lambda90
genr lambda70_0 = lambda70
genr lambda60_0 = lambda60
' Increase permanently the foreign currency liquidity preference due to an equivalent decrease in the preference for local currency bonds
smpl 1960 @last
lambda90 = 0.289395557025368
lambda70 = 0.0401358745977021
lambda60 = 0.0447034064308783
smpl @all
' Select the second alternative Scenario 17
REEs_mod.scenario(n, a="_17") "Scenario 17"
' Set simulation sample
smpl 1947 @last
' Solve the model for the current sample
REEs_mod.solve(i=p)
' Store shocked value to scenario
genr lambda90_17 = lambda90
genr lambda70_17 = lambda70
genr lambda60_17 = lambda60
' and get back shocked variable to its baseline value
lambda90 = lambda90_0
lambda70 = lambda70_0
lambda60 = lambda60_0
' Creates charts from simulated variables
' Creates the chart in Figure EXP-17.A
smpl 1955 2050
graph exp17a.line ((w_17-w_0)/w_0)*100 (((w_17/pd_17)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_17-pd_0)/pd_0)*100
exp17a.options linepat
exp17a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17a.name(1) Effect upon nominal wages
exp17a.name(2) Effect upon real wages
exp17a.name(3) Effect upon prices
exp17a.addtext(t,just(c),just(c)) Figure 17.a: Effect upon real wage rate, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17a
' Creates the chart in Figure EXP-17.B
smpl 1955 2050
graph exp17b.line (i_k_17/i_k_0-1)*100 (y_k_17/y_k_0-1)*100 (c_k_17/c_k_0-1)*100
exp17b.options linepat
exp17b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17b.name(1) Real fixed investment
exp17b.name(2) Real output
exp17b.name(3) Real consumption
exp17b.addtext(t,just(c),just(c)) Figure 17.B: Evolution of consumption, investment and output, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17b
' Creates the chart in Figure EXP-17.C
smpl 1955 2050
graph exp17c.line (x_k_17/x_k_0-1)*100 (y_k_17/y_k_0-1)*100 (m_k_17/m_k_0-1)*100
exp17c.options linepat
exp17c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17c.name(1) Real exports
exp17c.name(2) Real output
exp17c.name(3) Real imports
exp17c.addtext(t,just(c),just(c)) Figure 17.C: Evolution of exports, imports and output, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17c
' Creates the chart in Figure EXP-17.D
smpl 1955 2050
graph exp17d.line ((psbr_17/y_17)-(psbr_0/y_0))*100 ((ca_row_17/y_17)-(ca_row_0/y_0))*100
exp17d.options linepat
exp17d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17d.name(1) PSBR (Government surplus)
exp17d.name(2) Current Account
exp17d.addtext(t,just(c),just(c)) Figure 17.D: Evolution of government surplus and current account to GDP ratios, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17d
' Creates the chart in Figure EXP-17.E
smpl 1955 2050
graph exp17e.line nirr_17-nirr_0
exp17e.options linepat
exp17e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp17e.name(1) Effect upon net international reserve ratio
exp17e.addtext(t,just(c),just(c)) Figure 17.E: Change in net international reserves ratio, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17e
' Creates the chart in Figure EXP-17.F
smpl 1955 2050
graph exp17f.line 101 (er_17-er_0+1)*100 99
exp17f.options linepat
exp17f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp17f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp17f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp17f.name(1) Inflationary pressure threshold
exp17f.name(2) Employment rate
exp17f.name(3) Deflationary pressure threshold
exp17f.addtext(t,just(c),just(c)) Figure EXP-17.F: Evolution of employment rate, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17f
' Creates the chart in Figure EXP-17.G
smpl 1955 2050
graph exp17g.line (td_17/y_17-td_0/y_0) (bcbs_17/y_17-bcbs_0/y_0) (gdh_g_17/y_17-gdh_g_0/y_0)
exp17g.options linepat
exp17g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17g.name(1) Total Government debt
exp17g.name(2) Central Bank bills
exp17g.name(3) Government deposits at Central Bank
exp17g.addtext(t,just(c),just(c)) Figure 17.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17g
' Creates the chart in Figure EXP-17.H
smpl 1955 2050
graph exp17h.line ((c_k_17-c_k_0)/y_k_0)*100 ((i_k_17-i_k_0)/y_k_0)*100 ((g_k_17-g_k_0)/y_k_0)*100 ((x_k_17-x_k_0)/y_k_0)*100 -((m_k_17-m_k_0)/y_k_0)*100 ((y_k_17-y_k_0)/y_k_0)*100
exp17h.options linepat
exp17h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp17h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp17h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp17h.name(1) Real consumption
exp17h.name(2) Real investment
exp17h.name(3) Real government expenditure
exp17h.name(4) Real exports
exp17h.name(5) Real imports
exp17h.name(6) Real GDP
exp17h.addtext(t,just(c),just(c)) Figure 17.H: Contribution to real GDP growth of a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17h
' Creates the chart in Figure EXP-17.I
smpl 1955 2050
graph exp17i.line (((w_17/pr_17)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_17-pd_0)/pd_0)*100
exp17i.options linepat
exp17i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17i.name(1) Effect upon wage to productivity ratio
exp17i.name(2) Effect upon prices
exp17i.addtext(t,just(c),just(c)) Figure 17.I: Inflationary effect, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17i
' Creates the chart in Figure EXP-17.J
smpl 1955 2050
graph exp17j.line (xrendog_17/xrendog_0-1)*100
exp17j.options linepat
exp17j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp17j.name(1) Effect upon shadow exchange rate
exp17j.addtext(t,just(c),just(c)) Figure 17.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17j
' Creates the chart in Figure EXP-17.K
smpl 1955 2050
graph exp17k.line ((ydr_h_k_e_17-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_17-v_h_k_0)/v_h_k_0)*100
exp17k.options linepat
exp17k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17k.name(1) Real effect upon regular disposable income
exp17k.name(2) Real effect upon households’ wealth
exp17k.addtext(t,just(c),just(c)) Figure 17.K: Real (income and wealth) effects upon consumption, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17k
' Creates the chart in Figure EXP-17.L
smpl 1955 2050
graph exp17l.line (((cg_h_17/pd_17)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp17l.options linepat
exp17l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp17l.name(1) Real effect upon capital gains of households
exp17l.addtext(t,just(c),just(c)) Figure 17.L: Real effect upon capital gains, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17l
' Creates the chart in Figure EXP-17.O
smpl 1955 2050
graph exp17o.line rm_17-rm_0 rbg_17-rbg_0 rbb_17-rbb_0 rbf_17-rbf_0 rl_17-rl_0 rlcb_17-rlcb_0
exp17o.options linepat
exp17o.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17o.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17o.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17o.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp17o.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp17o.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp17o.name(1) Effect upon deposit rate
exp17o.name(2) Effect upon T-Bills rate
exp17o.name(3) Effect upon Bank CDs rate
exp17o.name(4) Effect upon Corporate-Bills (Commercial paper) rate
exp17o.name(5) Effect upon Loans rate
exp17o.name(6) Effect upon Discount rate
exp17o.addtext(t,just(c),just(c)) Figure 17.O: Effect upon short-term rates, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17o
' Creates the chart in Figure EXP-17.P
smpl 1955 2050
graph exp17p.line rblg_17-rblg_0 rblf_17-rblf_0 rk_17-rk_0 fcrblg_17-fcrblg_0
exp17p.options linepat
exp17p.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp17p.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp17p.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp17p.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp17p.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp17p.name(1) Effect upon T-Bonds rate
exp17p.name(2) Effect upon Corporate-Bonds rate
exp17p.name(3) Effect upon Corporate Dividens yield
exp17p.name(4) Effect upon Sovereign Bonds rate
exp17p.name(5) Effect upon Loans rate
exp17p.addtext(t,just(c),just(c)) Figure 17.P: Effect upon long-term rates, following a permanent increase (decrease) in the preference for foreign (local) currency bonds
show exp17p