From 1868e5b84edacf261a0659a74b2c533b57250b47 Mon Sep 17 00:00:00 2001 From: NHgit213 <85891088+NHgit213@users.noreply.github.com> Date: Mon, 3 Apr 2023 12:37:59 -0400 Subject: [PATCH 1/2] Update macro.md I updated the macro.md file by replacing "OG-USA" with "OG-ZAF", modifying data sources, and replacing values for indicators (alpha T, alpha G, gamma, sigma, epsilon, initial_foreign_debt_ratio, zeta_D, zeta_K). --- docs/book/content/calibration/macro.md | 24 +++++++++++------------- 1 file changed, 11 insertions(+), 13 deletions(-) diff --git a/docs/book/content/calibration/macro.md b/docs/book/content/calibration/macro.md index b8a2379..3cb12eb 100644 --- a/docs/book/content/calibration/macro.md +++ b/docs/book/content/calibration/macro.md @@ -5,7 +5,7 @@ ### Elasticity of labor supply -As discussed in the [OG-Core household theory documentation](https://pslmodels.github.io/OG-Core/content/theory/households.html), we use the elliptical disutility of labor function developed by {cite}`EvansPhillips:2017`. We then fit the parameters of the elliptical utility function to match the marginal disutility from a constant Frisch elasticity function. `OG-USA` users enter the constant Frisch elasticity as a parameter. {cite}`Peterman:2016` finds a range of Frisch elasticities estimated from microeconomic and macroeconomic data. These range from 0 to 4. Peterman makes the case that in lifecycle models with out an extensive margin for employment, such as `OG-USA`, the Frisch elasticity should be higher. We take a default value of 0.4 from {cite}`Altonji:1986`. +As discussed in the [OG-Core household theory documentation](https://pslmodels.github.io/OG-Core/content/theory/households.html), we use the elliptical disutility of labor function developed by {cite}`EvansPhillips:2017`. We then fit the parameters of the elliptical utility function to match the marginal disutility from a constant Frisch elasticity function. `OG-ZAF` users enter the constant Frisch elasticity as a parameter. {cite}`Peterman:2016` finds a range of Frisch elasticities estimated from microeconomic and macroeconomic data. These range from 0 to 4. Peterman makes the case that in lifecycle models without an extensive margin for employment the Frisch elasticity should be higher. For `OG-ZAF` we take a default value of 0.4 from {cite}`Altonji:1986`. ### Intertemporal elasticity of substitution @@ -13,12 +13,12 @@ The default value for the intertemporal elasticity of substitution, $\sigma$, is ### Rate of time preference -We take our default value for the rate of time preference parameter, $\beta$ from {cite}`Carroll:2009`. We set the value of to $\beta=0.96$ (on an annual basis). +We take our default value for the rate of time preference parameter, $\beta$ from {cite}`Carroll:2009`. We set the value to $\beta=0.96$ (on an annual basis). ## Economic Assumptions -As the default rate of labor augmenting technological change, $g_y$, we use a value of 3%. The average annual growth rate in GDP per capita in the United States since 1948 is 2% per year. +As the default rate of labor augmenting technological change, $g_y$, we use a value of 3%. The average annual growth rate in GDP per capita in South Africa between 1961 and 2021 is 0.7% per year. ## Aggregate Production Function and Capital Accumulation @@ -26,27 +26,27 @@ The [OG-Core firm theory documentation](https://pslmodels.github.io/OG-Core/cont ### Elasticity of substitution -`OG-USA`'s default parameterization has an elasticity of substitution of $\varepsilon=1.0$, which implies a Cobb-Douglas production function. +`OG-ZAF`'s default parameterization has an elasticity of substitution of $\varepsilon=1.0$, which implies a Cobb-Douglas production function. ### Capital's share of output -The historical value in U.S. is about 0.33, but {cite}`EHS:2013` find capital's share is increasing. We therefore use the slightly higher value of $\gamma =0.35$. Note that the mean of capital's share of income from 1950 onwards is 0.38 from the Penn World Tables. +Here, we use a value of $\gamma =1.0$ from the UN Data Portal API (see https://data.un.org). ## Open Economy Parameters ### Foreign holding of government debt in the initial period -The path of foreign holding of domestic debt is endogenous, but the initial period stock of debt held by foreign investors is exogenous. We set this parameter, `initial_foreign_debt_ratio` to 0.4, consistent with data from the Financial Accounts of the United States for 2019. +The path of foreign holding of domestic debt is endogenous, but the initial period stock of debt held by foreign investors is exogenous. We set this parameter, `initial_foreign_debt_ratio` to 0.26, consistent with data from the World Bank WDI. ### Foreign purchases of newly issued debt -We set $\zeta_D = 0.4$. This is the average share of foreign purchases of newly issued government debt found from the Financial Accounts of the United States. +We set $\zeta_D = 0.26$. This is the average share of foreign purchases of newly issued government debt found from the World Bank WDI. ### Foreign holdings of excess capital -We set $\zeta_K = 0.1$. +We set $\zeta_K = 0.9$. ## Government Debt, Spending and Transfers @@ -57,12 +57,10 @@ The path of government debt is endogenous. But the initial value is exogenous. ### Aggregate transfers -Aggregate (non-Social Security) transfers to households are set as a share of GDP with the parameter $\alpha_T$. Using the [OMB Fiscal Year 2017 Historical Tables](https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/hist.pdf), we define transfers as: -
Transfers = VA Benefits and Services (700) + Income Security (600) + Medicare (570) + Healthcare Services (551)
- -We exclude Social Security from transfers since it is modeled specifically. With this definition, the share of transfers to GDP in 2015 is 0.09. +Aggregate (non-Social Security) transfers to households are set as a share of GDP with the parameter $\alpha_T$. We exclude Social Security from transfers since it is modeled specifically. With this definition, the share of transfers to GDP in 2015 is 0.04 according to Federal Reserve Economic Data (FRED). ### Government expenditures -Government spending on goods and services are also set as a share of GDP with the parameter $\alpha_G$. Using the [OMB Fiscal Year 2017 Historical Tables](https://www.whitehouse.gov/sites/default/files/omb/budget/fy2017/assets/hist.pdf), we define government spending as: +Government spending on goods and services are also set as a share of GDP with the parameter $\alpha_G$. We define government spending as:
Government Spending = Total Outlays - Transfers - Net Interest on Debt - Social Security
+With this definition, the share of government expenditure to GDP is 0.27 based on FRED. From 7c292d39aeabe7ab1c071586ae881b78f6e0db32 Mon Sep 17 00:00:00 2001 From: Nicole Hunt <85891088+NHgit213@users.noreply.github.com> Date: Mon, 28 Aug 2023 14:10:56 -0400 Subject: [PATCH 2/2] Update macro.md Changed default value of $\gamma to 0.61. --- docs/book/content/calibration/macro.md | 3 +-- 1 file changed, 1 insertion(+), 2 deletions(-) diff --git a/docs/book/content/calibration/macro.md b/docs/book/content/calibration/macro.md index 3cb12eb..01e2239 100644 --- a/docs/book/content/calibration/macro.md +++ b/docs/book/content/calibration/macro.md @@ -30,8 +30,7 @@ The [OG-Core firm theory documentation](https://pslmodels.github.io/OG-Core/cont ### Capital's share of output -Here, we use a value of $\gamma =1.0$ from the UN Data Portal API (see https://data.un.org). - +Here, we use a default value of $\gamma =0.61$. ## Open Economy Parameters