' Eighteenth Experiment: A permanent increase in liquidity preference due to an equivalent decrease in the preference for holding equities
' Before running this program, run first REEs_mod so as to create a workfile and a baseline solution
' This program generates figures EXP-18.A to EXP-18.I discussed in the Appendix
smpl @all
' Store original value of shocked parameter to baseline
genr lambda10_0 = lambda10
genr lambda80_0 = lambda80
' Increase permanently the liquidity preference due to an equivalent decrease in the preference for holding equities
smpl 1960 @last
lambda10 = 0.26531990365578
lambda80 = 0.238592165446411
smpl @all
' Select the second alternative Scenario 18
REEs_mod.scenario(n, a="_18") "Scenario 18"
' Set simulation sample
smpl 1947 @last
' Solve the model for the current sample
REEs_mod.solve(i=p)
' Store shocked value to scenario
genr lambda10_18 = lambda10
genr lambda80_18 = lambda80
' and get back shocked variable to its baseline value
lambda10 = lambda10_0
lambda80 = lambda80_0
' Creates charts from simulated variables
' Creates the chart in Figure EXP-18.A
smpl 1955 2050
graph exp18a.line ((w_18-w_0)/w_0)*100 (((w_18/pd_18)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_18-pd_0)/pd_0)*100
exp18a.options linepat
exp18a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18a.name(1) Effect upon nominal wages
exp18a.name(2) Effect upon real wages
exp18a.name(3) Effect upon prices
exp18a.addtext(t,just(c),just(c)) Figure 18.a: Effect upon real wage rate, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18a
' Creates the chart in Figure EXP-18.B
smpl 1955 2050
graph exp18b.line (i_k_18/i_k_0-1)*100 (y_k_18/y_k_0-1)*100 (c_k_18/c_k_0-1)*100
exp18b.options linepat
exp18b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18b.name(1) Real fixed investment
exp18b.name(2) Real output
exp18b.name(3) Real consumption
exp18b.addtext(t,just(c),just(c)) Figure 18.B: Evolution of consumption, investment and output, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18b
' Creates the chart in Figure EXP-18.C
smpl 1955 2050
graph exp18c.line (x_k_18/x_k_0-1)*100 (y_k_18/y_k_0-1)*100 (m_k_18/m_k_0-1)*100
exp18c.options linepat
exp18c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18c.name(1) Real exports
exp18c.name(2) Real output
exp18c.name(3) Real imports
exp18c.addtext(t,just(c),just(c)) Figure 18.C: Evolution of exports, imports and output, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18c
' Creates the chart in Figure EXP-18.D
smpl 1955 2050
graph exp18d.line ((psbr_18/y_18)-(psbr_0/y_0))*100 ((ca_row_18/y_18)-(ca_row_0/y_0))*100
exp18d.options linepat
exp18d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18d.name(1) PSBR (Government surplus)
exp18d.name(2) Current Account
exp18d.addtext(t,just(c),just(c)) Figure 18.D: Evolution of government surplus and current account to GDP ratios, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18d
' Creates the chart in Figure EXP-18.E
smpl 1955 2050
graph exp18e.line nirr_18-nirr_0
exp18e.options linepat
exp18e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp18e.name(1) Effect upon net international reserve ratio
exp18e.addtext(t,just(c),just(c)) Figure 18.E: Change in net international reserves ratio, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18e
' Creates the chart in Figure EXP-18.F
smpl 1955 2050
graph exp18f.line 101 (er_18-er_0+1)*100 99
exp18f.options linepat
exp18f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp18f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp18f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp18f.name(1) Inflationary pressure threshold
exp18f.name(2) Employment rate
exp18f.name(3) Deflationary pressure threshold
exp18f.addtext(t,just(c),just(c)) Figure EXP-18.F: Evolution of employment rate, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18f
' Creates the chart in Figure EXP-18.G
smpl 1955 2050
graph exp18g.line (td_18/y_18-td_0/y_0) (bcbs_18/y_18-bcbs_0/y_0) (gdh_g_18/y_18-gdh_g_0/y_0)
exp18g.options linepat
exp18g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18g.name(1) Total Government debt
exp18g.name(2) Central Bank bills
exp18g.name(3) Government deposits at Central Bank
exp18g.addtext(t,just(c),just(c)) Figure 18.G: Evolution of government debt, central bank bills, and government deposits at CB, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18g
' Creates the chart in Figure EXP-18.H
smpl 1955 2050
graph exp18h.line ((c_k_18-c_k_0)/y_k_0)*100 ((i_k_18-i_k_0)/y_k_0)*100 ((g_k_18-g_k_0)/y_k_0)*100 ((x_k_18-x_k_0)/y_k_0)*100 -((m_k_18-m_k_0)/y_k_0)*100 ((y_k_18-y_k_0)/y_k_0)*100
exp18h.options linepat
exp18h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp18h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp18h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp18h.name(1) Real consumption
exp18h.name(2) Real investment
exp18h.name(3) Real government expenditure
exp18h.name(4) Real exports
exp18h.name(5) Real imports
exp18h.name(6) Real GDP
exp18h.addtext(t,just(c),just(c)) Figure 18.H: Contribution to real GDP growth of a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18h
' Creates the chart in Figure EXP-18.I
smpl 1955 2050
graph exp18i.line (((w_18/pr_18)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_18-pd_0)/pd_0)*100
exp18i.options linepat
exp18i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18i.name(1) Effect upon wage to productivity ratio
exp18i.name(2) Effect upon prices
exp18i.addtext(t,just(c),just(c)) Figure 18.I: Inflationary effect, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18i
' Creates the chart in Figure EXP-18.J
smpl 1955 2050
graph exp18j.line (xrendog_18/xrendog_0-1)*100
exp18j.options linepat
exp18j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp18j.name(1) Effect upon shadow exchange rate
exp18j.addtext(t,just(c),just(c)) Figure 18.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18j
' Creates the chart in Figure EXP-18.K
smpl 1955 2050
graph exp18k.line ((ydr_h_k_e_18-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_18-v_h_k_0)/v_h_k_0)*100
exp18k.options linepat
exp18k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18k.name(1) Real effect upon regular disposable income
exp18k.name(2) Real effect upon households’ wealth
exp18k.addtext(t,just(c),just(c)) Figure 18.K: Real (income and wealth) effects upon consumption, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18k
' Creates the chart in Figure EXP-18.L
smpl 1955 2050
graph exp18l.line (((cg_h_18/pd_18)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp18l.options linepat
exp18l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp18l.name(1) Real effect upon capital gains of households
exp18l.addtext(t,just(c),just(c)) Figure 18.L: Real effect upon capital gains, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18l
' Creates the chart in Figure EXP-18.O
smpl 1955 2050
graph exp18o.line rm_18-rm_0 rbg_18-rbg_0 rbb_18-rbb_0 rbf_18-rbf_0 rl_18-rl_0 rlcb_18-rlcb_0
exp18o.options linepat
exp18o.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18o.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18o.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18o.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp18o.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp18o.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp18o.name(1) Effect upon deposit rate
exp18o.name(2) Effect upon T-Bills rate
exp18o.name(3) Effect upon Bank CDs rate
exp18o.name(4) Effect upon Corporate-Bills (Commercial paper) rate
exp18o.name(5) Effect upon Loans rate
exp18o.name(6) Effect upon Discount rate
exp18o.addtext(t,just(c),just(c)) Figure 18.O: Effect upon short-term rates, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18o
' Creates the chart in Figure EXP-18.P
smpl 1955 2050
graph exp18p.line rblg_18-rblg_0 rblf_18-rblf_0 rk_18-rk_0 fcrblg_18-fcrblg_0
exp18p.options linepat
exp18p.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp18p.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp18p.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp18p.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp18p.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp18p.name(1) Effect upon T-Bonds rate
exp18p.name(2) Effect upon Corporate-Bonds rate
exp18p.name(3) Effect upon Corporate Dividens yield
exp18p.name(4) Effect upon Sovereign Bonds rate
exp18p.name(5) Effect upon Loans rate
exp18p.addtext(t,just(c),just(c)) Figure 18.P: Effect upon long-term rates, following a permanent increase (decrease) in the preference for liquidity (holding equities)
show exp18p