' Ninth Experiment: A one-period switch to a market-determined exchange rate

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

' This program generates Graphs EXP-9.A to EXP-9.I discussed in the Appendix

smpl @all

' Store original value of shocked parameter to baseline
genr op_0 = op

' Let the exchange rate float for one period (what can be achieved by increasing the trade/gdp ratio above which the CB decides to peg the fx rate)
smpl 1960 1960
op = 2
smpl @all

' Select the second alternative Scenario 9

REEs_mod.scenario(n, a="_9") "Scenario 9"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

REEs_mod.solve(i=p)

' Store shocked value to scenario
genr op_9 = op

' and get back shocked variable to its baseline value
op = op_0

' Creates charts from simulated variables

' Creates the chart in Graph EXP-9.A
smpl 1955 2050
graph exp9a.line ((w_9-w_0)/w_0)*100 (((w_9/pd_9)-(w_0/pd_0))/(w_0/pd_0))*100 ((pd_9-pd_0)/pd_0)*100
exp9a.options linepat
exp9a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9a.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9a.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp9a.name(1) Effect upon nominal wages
exp9a.name(2) Effect upon real wages
exp9a.name(3) Effect upon prices
exp9a.addtext(t,just(c),just(c)) Graph III.4.31: Effect upon real wage rate, following a one-period switch to a market-determined exchange rate

show exp9a

' Creates the chart in Graph EXP-9.B
smpl 1955 2050
graph exp9b.line (i_k_9/i_k_0-1)*100 (y_k_9/y_k_0-1)*100 (c_k_9/c_k_0-1)*100
exp9b.options linepat
exp9b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9b.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9b.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp9b.name(1) Real fixed investment
exp9b.name(2) Real output
exp9b.name(3) Real consumption
exp9b.addtext(t,just(c),just(c)) Graph 9.B: Evolution of consumption, investment and output, following a one-period switch to a market-determined exchange rate

show exp9b

' Creates the chart in Graph EXP-9.C
smpl 1955 2050
graph exp9c.line (x_k_9/x_k_0-1)*100 (y_k_9/y_k_0-1)*100 (m_k_9/m_k_0-1)*100
exp9c.options linepat
exp9c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9c.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9c.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp9c.name(1) Real exports
exp9c.name(2) Real output
exp9c.name(3) Real imports
exp9c.addtext(t,just(c),just(c)) Graph 9.C: Evolution of exports, imports and output, following a one-period switch to a market-determined exchange rate

show exp9c

' Creates the chart in Graph EXP-9.D
smpl 1955 2050
graph exp9d.line ((psbr_9/y_9)-(psbr_0/y_0))*100 ((ca_row_9/y_9)-(ca_row_0/y_0))*100
exp9d.options linepat
exp9d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9d.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9d.name(1) PSBR (Government surplus)
exp9d.name(2) Current Account
exp9d.addtext(t,just(c),just(c)) Graph III.4.33: Evolution of government surplus and current account to GDP ratios, following a one-period switch to a market-determined exchange rate

show exp9d

' Creates the chart in Graph EXP-9.E
smpl 1955 2050
graph exp9e.line (nirr_9-nirr_0)*12
exp9e.options linepat
exp9e.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp9e.name(1) Effect upon net international reserve ratio
exp9e.addtext(t,just(c),just(c)) Graph III.4.32: Change in net international reserves ratio, following a one-period switch to a market-determined exchange rate

show exp9e

' Creates the chart in Graph EXP-9.F
smpl 1955 2050
graph exp9f.line 101 (er_9-er_0+1)*100 99
exp9f.options linepat
exp9f.setelem(1) lcolor(black) lwidth(2) lpat(2)
exp9f.setelem(2) lcolor(green) lwidth(2) lpat(1)
exp9f.setelem(3) lcolor(black) lwidth(2) lpat(2)
exp9f.name(1) Inflationary pressure threshold
exp9f.name(2) Employment rate
exp9f.name(3) Deflationary pressure threshold
exp9f.addtext(t,just(c),just(c)) Graph III.4.30: Evolution of employment rate, following a one-period switch to a market-determined exchange rate

show exp9f

' Creates the chart in Graph EXP-9.G
smpl 1955 2050
graph exp9g.line (td_9/y_9-td_0/y_0)*100 (bcbs_9/y_9-bcbs_0/y_0)*100 (gdh_g_9/y_9-gdh_g_0/y_0)*100
exp9g.options linepat
exp9g.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9g.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9g.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp9g.name(1) Total Government debt
exp9g.name(2) Central Bank bills
exp9g.name(3) Government deposits at Central Bank
exp9g.addtext(t,just(c),just(c)) Graph III.4.34: Evolution of government debt, central bank bills, and government deposits at CB, following a one-period switch to a market-determined exchange rate

show exp9g

' Creates the chart in Graph EXP-9.H
smpl 1955 2050
graph exp9h.line ((c_k_9-c_k_0)/y_k_0)*100 ((i_k_9-i_k_0)/y_k_0)*100 ((g_k_9-g_k_0)/y_k_0)*100 ((x_k_9-x_k_0)/y_k_0)*100 -((m_k_9-m_k_0)/y_k_0)*100 ((y_k_9-y_k_0)/y_k_0)*100
exp9h.options linepat
exp9h.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9h.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9h.setelem(3) lcolor(red) lwidth(2) lpat(3)
exp9h.setelem(4) lcolor(black) lwidth(2) lpat(4)
exp9h.setelem(5) lcolor(yellow) lwidth(2) lpat(5)
exp9h.setelem(6) lcolor(orange) lwidth(2) lpat(6)
exp9h.name(1) Real consumption
exp9h.name(2) Real investment
exp9h.name(3) Real government expenditure
exp9h.name(4) Real exports
exp9h.name(5) Real imports
exp9h.name(6) Real GDP
exp9h.addtext(t,just(c),just(c)) Graph III.4.29: Contribution to real GDP growth of a one-period switch to a market-determined exchange rate

show exp9h

' Creates the chart in Graph EXP-9.I
smpl 1955 2050
graph exp9i.line (((w_9/pr_9)-(w_0/pr_0))/(w_0/pr_0))*100 ((pd_9-pd_0)/pd_0)*100
exp9i.options linepat
exp9i.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9i.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9i.name(1) Effect upon wage to productivity ratio
exp9i.name(2) Effect upon prices
exp9i.addtext(t,just(c),just(c)) Graph 9.I: Inflationary effect, following a one-period switch to a market-determined exchange rate

show exp9i

' Creates the chart in Graph EXP-9.J
smpl 1955 2050
graph exp9j.line (xrendog_9/xrendog_0-1)*100
exp9j.options linepat
exp9j.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp9j.name(1) Effect upon shadow exchange rate
exp9j.addtext(t,just(c),just(c)) Graph 9.J: Hypothetical effect upon shadow exchange rate (exchange rate that would prevail if market-determined), following a one-period switch to a market-determined exchange rate

show exp9j

' Creates the chart in Graph EXP-9.K
smpl 1955 2050
graph exp9k.line ((ydr_h_k_e_9-ydr_h_k_e_0)/ydr_h_k_e_0)*100 ((v_h_k_9-v_h_k_0)/v_h_k_0)*100
exp9k.options linepat
exp9k.setelem(1) lcolor(blue) lwidth(2) lpat(1)
exp9k.setelem(2) lcolor(green) lwidth(2) lpat(2)
exp9k.name(1) Real effect upon regular disposable income
exp9k.name(2) Real effect upon households’ wealth
exp9k.addtext(t,just(c),just(c)) Graph 9.K: Real (income and wealth) effects upon consumption, following a one-period switch to a market-determined exchange rate

show exp9k

' Creates the chart in Graph EXP-9.L
smpl 1955 2050
graph exp9l.line (((cg_h_9/pd_9)-(cg_h_0/pd_0))/(cg_h_0/pd_0))*100
exp9l.options linepat
exp9l.setelem(1) lcolor(green) lwidth(2) lpat(2)
exp9l.name(1) Real effect upon capital gains of households
exp9l.addtext(t,just(c),just(c)) Graph 9.L: Real effect upon capital gains, following a one-period switch to a market-determined exchange rate

show exp9l