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OPENFLEX_S
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OPENFLEX_S
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' MODEL OPENFLEX_S for Eviews version 10
' CJE WEB version
' Created by E. Carnevali and M. Veronese Passarella, 12 February 2020
' ****************************************************************************
' Create a workfile, naming it OPENFLEX, to hold annual data from 1950 to 2050
wfcreate(wf = openflex_s, page = annual) a 1950 2100
smpl @all
'Create and set import and export price elasticities
series mu1
mu1.label(d) Parameter determining real imports in Country A
mu1 = 0.5
series eps1
eps1.label(d) Parameter determining real exports in Country A
eps1 = 1 - mu1 '<--- no improvement according to MLC (original value = 0.7)
'*****************************************************************************
' Creates and documents series
series b_AA_d
b_AA_d.label(d) Bills issued by Country A acquired by Country A: demand
series b_AA_s
b_AA_s.label(d) Bills issued by Country A acquired by Country A: supply
series b_cb_AB_d
b_cb_AB_d.label(d) Bills issued by Country B, demanded by Country A Central bank
series b_cb_AB_s
b_cb_AB_s.label(d) Bills issued by Country B, supplied to Country A Central bank
series b_cb_AA_d
b_cb_AA_d.label(d) Bills issued by Country A, demanded by Country A Central bank
series b_cb_AA_s
b_cb_AA_s.label(d) Bills issued by Country A, supplied to Country A Central bank
series b_A_s
b_A_s.label(d) Bills issued by Country A - total supply
series b_AB_d
b_AB_d.label(d) Bills issued by Country B acquired by Country A: demand
series b_AB_s
b_AB_s.label(d) Bills issued by Country B acquired by Country A: supply
series b_BA_d
b_BA_d.label(d) Bills issued by Country A acquired by Country B: demand
series b_BA_s
b_BA_s.label(d) Bills issued by Country A acquired by Country B: supply
series b_B_s
b_B_s.label(d) Bills issued by Country B - total supply
series b_BB_d
b_BB_d.label(d) Bills issued by Country B acquired by Country B: demand
series b_BB_s
b_BB_s.label(d) Bills issued by Country B acquired by Country B: supply
series b_cb_BB_d
b_cb_BB_d.label(d) Bills issued by Country B demanded by Country B Central Bank
series b_cb_BB_s
b_cb_BB_s.label(d) Bills issued by Country B supplied to Country B Central Bank
series c_k_A
c_k_A.label(d) Real consumption in Country A
series c_k_B
c_k_B.label(d) Real consumption in Country B
series cab_A
cab_A.label(d) Current account balance in Country A
series cab_B
cab_B.label(d) Current account balance in Country B
series cons_A
cons_A.label(d) Consumption in Country A
series cons_B
cons_B.label(d) Consumption in Country B
series ds_A
ds_A.label(d) Domestic sales in Country A
series ds_B
ds_B.label(d) Domestic sales in Country B
series ds_k_A
ds_k_A.label(d) Real domestic sales in Country A
series ds_k_B
ds_k_B.label(d) Real domestic sales in Country B
series dxre_A
dxre_A.label(d) Expected change in the exchange rate of Country A (measured as units of Country A currency against 1 unit of Country B currency)
series dxre_B
dxre_B.label(d) Expected change in the exchange rate Country B (measured as units of Country B currency against 1 unit of Country A currency)
series f_cb_A
f_cb_A.label(d) Profits of Central Bank in Country A
series f_cb_B
f_cb_B.label(d) Profits of Central Bank in Country B
series g_A
g_A.label(d) Government expenditure in Country A
series g_B
g_B.label(d) Government expenditure in Country B
series g_k_A
g_k_A.label(d) Real government expenditure in Country A
series g_k_B
g_k_B.label(d) Real government expenditure in Country B
series h_A_d
h_A_d.label(d) Demand for cash of Country A
series h_A_s
h_A_s.label(d) Supply of Country A cash
series h_B_d
h_B_d.label(d) Demand for cash of Country B
series h_B_s
h_B_s.label(d) Supply of Country B cash
series im_A
im_A.label(d) Imports of Country A from Country B
series im_B
im_B.label(d) Imports of Country B from Country A
series im_k_A
im_k_A.label(d) Real imports of Country A from Country B
series im_k_B
im_k_B.label(d) Real imports of Country B from Country A
series kab_A
kab_A.label(d) Capital account balance in Country A
series kab_B
kab_B.label(d) Current account balance in Country B
series kabp_A
kabp_A.label(d) Capital account balance in Country A, excluding official transactions
series kabp_B
kabp_B.label(d) Current account balance in Country B, excluding official transactions
series n_A
n_A.label(d) Employment in Country A
series n_B
n_B.label(d) Employment in Country B
series or_A
or_A.label(d) Gold reserves in Country A
series or_B
or_B.label(d) Gold reserves in Country B
series pds_A
pds_A.label(d) Price of domestic sales in Country A
series pds_B
pds_B.label(d) Price of domestic sales in Country B
series pg_A
pg_A.label(d) Price of gold in Country A
series pg_B
pg_B.label(d) Price of gold in Country B
series pm_B
pm_B.label(d) Price of imports in Country B
series pm_A
pm_A.label(d) Price of imports in Country A
series pr_A
pr_A.label(d) Productivity in Country A
series pr_B
pr_B.label(d) Productivity in Country B
series ps_A
ps_A.label(d) Price of sales in Country A
series ps_B
ps_B.label(d) Price of sales in Country B
series psbr_A
psbr_A.label(d) Government deficit in Country A
series psbr_B
psbr_B.label(d) Government deficit in Country B
series py_B
py_B.label(d) Price of output in Country B
series py_A
py_A.label(d) Price of imports in Country A
series px_B
px_B.label(d) Price of exports in Country B
series px_A
px_A.label(d) Price of exports in Country A
series r_A
r_A.label(d) Interest rate on Country A bills
series r_B
r_B.label(d) Interest rate on Country B bills
series s_A
s_A.label(d) Value of sales in Country A
series s_B
s_B.label(d) Value of sales in Country B
series s_k_A
s_k_A.label(d) Real sales in Country A
series s_k_B
s_k_B.label(d) Real sales in Country B
series t_A
t_A.label(d) Tax revenue in Country A
series t_B
t_B.label(d) Tax revenue in Country B
series v_A
v_A.label(d) Net financial assets of Country A
series v_B
v_B.label(d) Net financial assets of Country B
series v_k_A
v_k_A.label(d) Real net financial assets of Country A
series v_k_B
v_k_B.label(d) Real net financial assets of Country B
series w_A
w_A.label(d) Nominal wage rate in Country A
series w_B
w_B.label(d) Nominal wage rate in Country B
series x_A
x_A.label(d) Exports from Country A to Country B
series x_B
x_B.label(d) Exports from Country B to Country A
series x_k_A
x_k_A.label(d) Real exports from Country A to Country B
series x_k_B
x_k_B.label(d) Real exports from Country B to Country A
series xr_A
xr_A.label(d) Exchange rate: units of S currency against 1 unit of N currency
series xr_B
xr_B.label(d) Exchange rate: units of N currency against 1 unit of S currency
series xre_A
xre_A.label(d) Expected exchange rate: units of S currency against 1 unit of N currency
series xre_B
xre_B.label(d) Expected exchange rate: units of N currency against 1 unit of S currency
series yd_A
yd_A.label(d) Disposable income in Country A
series yd_B
yd_B.label(d) Disposable income in Country B
series ydhs_A
ydhs_A.label(d) Haig-Simons disposable income in Country A
series ydhs_B
ydhs_B.label(d) Haig-Simons disposable income in Country B
series ydhs_k_A
ydhs_k_A.label(d) Real Haig-Simons disposable income in Country A
series ydhs_k_B
ydhs_k_B.label(d) Real Haig-Simons disposable income in Country B
series ydhse_k_A
ydhse_k_A.label(d) Expected real Haig-Simons disposable income in Country A
series ydhse_k_B
ydhse_k_B.label(d) Expected real Haig-Simons disposable income in Country B
series y_A
y_A.label(d) Income in Country A
series y_B
y_B.label(d) Income in Country B
series y_k_A
y_k_A.label(d) Real income in Country A
series y_k_B
y_k_B.label(d) Real income in Country B
' Generate parameters
series alpha1_B
alpha1_B.label(d) Propensity to consume out of income Country B
series alpha2_B
alpha2_B.label(d) Propensity to consume out of wealth Country B
series alpha1_A
alpha1_A.label(d) Propensity to consume out of income Country A
series alpha2_A
alpha2_A.label(d) Propensity to consume out of wealth Country A
series eps0
eps0.label(d) Parameter determining real exports in Country A
series eps2
eps2.label(d) Parameter determining real exports in Country A
series lambda10
lambda10.label(d) Parameter in asset demand function
series lambda11
lambda11.label(d) Parameter in asset demand function
series lambda12
lambda12.label(d) Parameter in asset demand function
series lambda20
lambda20.label(d) Parameter in asset demand function
series lambda21
lambda21.label(d) Parameter in asset demand function
series lambda22
lambda22.label(d) Parameter in asset demand function
series lambda40
lambda40.label(d) Parameter in asset demand function
series lambda41
lambda41.label(d) Parameter in asset demand function
series lambda42
lambda42.label(d) Parameter in asset demand function
series lambda50
lambda50.label(d) Parameter in asset demand function
series lambda51
lambda51.label(d) Parameter in asset demand function
series lambda52
lambda52.label(d) Parameter in asset demand function
series mu0
mu0.label(d) Parameter determining real imports in Country A
series mu2
mu2.label(d) Parameter determining real imports in Country A
series nu1m
nu1m.label(d) Parameter determining import prices in Country A
series nu0m
nu0m.label(d) Parameter determining import prices in Country A
series nu1m
nu1m.label(d) Parameter determining import prices in Country A
series nu0x
nu0x.label(d) Parameter determining export prices in Country A
series nu1x
nu1x.label(d) Parameter determining export prices in Country A
series theta_A
theta_A.label(d) Tax rate in Country A
series theta_B
theta_B.label(d) Tax rate in Country B
series phi_B
phi_B.label(d) mark-up in Country B
series phi_A
phi_A.label(d) mark-up in Country A
'Additional series
series tb_B
tb_B.label(d) Country B trade balance
series tb_A
tb_A.label(d) Country A trade balance
series finc_B
finc_B.label(d) Factor income to US
series finc_A
finc_A.label(d) Factor income to Country A
series p_madeA
p_madeA.label(d) Basic price made in Britain goods
series p_madeB
p_madeB.label(d) Basic price made in Country B goods
' Starting values for parameters
alpha1_A = 0.75
alpha1_B = 0.75
alpha2_A = 0.13333
alpha2_B = 0.13333
eps0 = - 2.1
eps2 = 1
lambda10 = 0.7
lambda11 = 5
lambda12 = 5
lambda20 = 0.25
lambda21 = 5
lambda22 = 5
lambda40 = 0.7
lambda41 = 5
lambda42 = 5
lambda50 = 0.25
lambda51 = 5
lambda52 = 5
mu0 = - 2.1
mu2 = 1
nu0m = - 0.00001
nu0x = - 0.00001
nu1m = 0.7
nu1x = 0.5
phi_A = 0.2381
phi_B = 0.2381
theta_A = 0.2
theta_B = 0.2
' Exogenous variables
b_cb_AB_s = 0.02031
dxre_B = 0
g_k_A = 16
g_k_B = 16
or_A = 7
pg_B = 1
pr_A = 1.3333
pr_B = 1.3333
r_A = 0.03
r_B = 0.03
w_A = 1
w_B = 1
' Starting values for stocks
b_cb_AA_d = 0.27984
b_cb_AA_s = 0.27984
b_cb_AB_d = 0.0203
b_cb_BB_d = 0.29843
b_cb_BB_s = 0.29843
b_A_s = 138.94
b_AA_d = 102.18
b_AA_s = 102.18
b_AB_d = 36.493
b_AB_s = 36.504
b_B_s = 139.02
b_BA_d = 36.497
b_BA_s = 36.487
b_BB_d = 102.19
b_BB_s = 102.19
h_A_d = 7.2987
h_A_s = 7.2987
h_B_d = 7.2995
h_B_s = 7.2995
or_B = 7
v_k_A = 152.62
v_k_B = 152.63
v_A = 145.97
v_B = 145.99001
' Other endogenous
c_k_A = 81.393
c_k_B = 81.401
cab_A = 0
cab_B = 0
cons_A = 77.851
cons_B = 77.86
ds_k_A = 97.393
ds_k_B = 97.401
ds_A = 93.154
ds_B = 93.164
dxre_A = 0
f_cb_A = 0.00869
f_cb_B = 0.00895
g_A = 15.304
g_B = 15.304
im_k_A = 11.928
im_k_B = 11.926
im_A = 11.407
im_B = 11.409
kabp_A = 0.00002
kabp_B = - 0.00002
n_A = 73.046
n_B = 73.054
pds_A = 0.95648
pds_B = 0.95649
pg_A = 0.99971
pm_A = 0.95628
pm_B = 0.95661
ps_A = 0.95646
ps_B = 0.9565
px_A = 0.95634
px_B = 0.95656
py_A = 0.95648
py_B = 0.95649
s_k_A = 109.32
s_k_B = 109.33
s_A = 104.56
s_B = 104.57
t_A = 19.463
t_B = 19.465
x_k_A = 11.926
x_k_B = 11.928
x_A = 11.406
x_B = 11.41
xr_A = 1.0003
xr_B = 0.99971
xre_A = 1.0003
xre_B = 0.99971
y_k_A = 97.392
y_k_B = 97.403
y_A = 93.154
y_B = 93.164
yd_A = 77.851
yd_B = 77.86
ydhs_k_A = 81.394
ydhs_k_B = 81.402
ydhse_k_A = 81.394
ydhse_k_B = 81.402
'Additional initial values
p_madeA = 0.9626701
p_madeB= 0.9626248
'******************************************************
'Create model
model openflex
' ACCOUNTING IDENTITIES
' Disposable income in Country A - eq. 12.1 MODIFIED
openflex.append yd_A = (y_A + r_A(-1)*b_AA_d(-1) + xr_B*r_B(-1)*b_AB_s(-1))*(1 - theta_A)
' Haig-Simons disposable income in Country A - eq. 12.2
openflex.append yd_hs_A = yd_A + d(xr_B)*b_AB_s(-1)
' Wealth accumulation in Country A - eq. 12.3 MODIFIED
openflex.append v_A = v_A(-1) + yd_hs_A - cons_A
' Disposable income in Country B - eq. 12.4 MODIFIED
openflex.append yd_B = (y_B + r_B(-1)*b_BB_d(-1) + xr_A*r_A(-1)*b_BA_s(-1))*(1 - theta_B)
' Haig-Simons disposable income in Country B - eq. 12.5
openflex.append yd_hs_B = yd_B + d(xr_A)*b_BA_s(-1)
' Wealth accumulation in Country B - eq. 12.6 MODIFIED
openflex.append v_B = v_B(-1) + yd_hs_B - cons_B
' Taxes in Country A - eq. 12.7
openflex.append t_A = theta_A*(y_A + r_A(-1)*b_AA_d(-1) + xr_B*r_B(-1)*b_AB_s(-1))
' Taxes in Country B - eq. 12.8
openflex.append t_B = theta_B*(y_B + r_B(-1)*b_BB_d(-1) + xr_A*r_A(-1)*b_BA_s(-1))
' Equations 12.9 & 12.10 are dropped in favour of equations 12.53 & 12.54
' Profits of Central Bank in Country A - eq. 12.11 - typo in the book for r_B
openflex.append f_cb_A = r_A(-1)*b_cb_AA_d(-1) + r_B(-1)*b_cb_AB_s(-1)*xr_B
' Profits of Central Bank in Country B - eq. 12.12
openflex.append f_cb_B = r_B(-1)*b_cb_BB_d(-1)
' Government budget constraint - Country A - eq. 12.13
openflex.append b_A_s = b_A_s(-1) + g_A + r_A(-1)*b_A_s(-1) - t_A - f_cb_A
' Government budget constraint - Country B - eq. 12.14
openflex.append b_B_s = b_B_s(-1) + g_B + r_B(-1)*b_B_s(-1) - t_B - f_cb_B
' Current account balance - Country A - eq. 12.15
openflex.append cab_A = x_A - im_A + xr_B*r_B(-1)*b_AB_s(-1) - r_A(-1)*b_BA_s(-1) + r_B(-1)*b_cb_AB_s(-1)*xr_B
' Capital account balance in Country A - eq. 12.16
openflex.append kab_A = kabp_A - (xr_B*d(b_cb_AB_s) + pg_A*d(or_A))
' Current account balance in Country B - eq. 12.17
openflex.append cab_B = x_B - im_B + xr_A*r_A(-1)*b_BA_s(-1) - r_B(-1)*b_AB_s(-1) - r_B(-1)*b_cb_AB_s(-1)
' Capital account balance in Country B - eq. 12.18
openflex.append kab_B = kabp_B + d(b_cb_AB_s) - pg_B*d(or_B)
' Capital account balance in Country A, net of official transactions - eq. 12.19
openflex.append kabp_A = - d(b_AB_s)*xr_B + d(b_BA_s)
' Capital account balance in US, net of official transactions - eq. 12.20
openflex.append kabp_B = - d(b_BA_s)*xr_A + d(b_AB_s)
' TRADE
' Import prices in Country A - eq. 12.21 MODIFIED
openflex.append pm_A = exp(nu0m + nu1m*log(py_B) + (1 - nu1m)*log(py_A) - nu1m*log(xr_A))
' Export prices in Country A - eq. 12.22 MODIEFIED
openflex.append px_A = exp(nu0x + nu1x*log(py_B) + (1 - nu1x)*log(py_A) - nu1x*log(xr_A))
' Export prices in Country B - eq. 12.23
openflex.append px_B = pm_A*xr_A
' Import prices in Country B - eq. 12.24
openflex.append pm_B = px_A*xr_A
' Real exports from Country A - eq. 12.25 - depends on current relative price MODIFIED
openflex.append x_k_A = exp(eps0 - eps1*log(pm_B(-1)/py_B(-1)) + eps2*log(y_k_B))
' Real imports of Country A - eq. 12.26 MODIFIED
openflex.append im_k_A = exp(mu0 - mu1*log(pm_A(-1)/py_A(-1)) + mu2*log(y_k_A))
' Real exports from Country B - eq. 12.27
openflex.append x_k_B = im_k_A
' Real imports of Country B - eq. 12.28
openflex.append im_k_B = x_k_A
' Exports of Country A - eq. 12.29
openflex.append x_A = x_k_A*px_A
' Exports of Country B - eq. 12.30
openflex.append x_B = x_k_B*px_B
' Imports of Country A - eq. 12.31
openflex.append im_A = im_k_A*pm_A
' Imports of Country B - eq. 12.32
openflex.append im_B = im_k_B*pm_B
'************************************************************************************************************************
'ADDITIONAL EQUATIONS FOR TRADE BALANCES ***
'Trade balance of Country A
openflex.append tb_A = x_A - im_A
'Trade balance of US
openflex.append tb_B = x_B - im_B
'Factor income of Country A
openflex.append finc_A = xr_B*r_B(-1)*b_AB_s(-1) - r_A(-1)*b_BA_s(-1) + r_B(-1)*b_cb_AB_s(-1)*xr_B
'Factor income of US
openflex.append finc_B = xr_A*r_A(-1)*b_BA_s(-1) - r_B(-1)*b_AB_s(-1) - r_B(-1)*b_cb_AB_s(-1)
'************************************************************************************************************************
' INCOME AND EXPENDITURE
' Real wealth in Country A - eq. 12.33
openflex.append v_k_A = v_A/pds_A
' Real wealth in Country B - eq. 12.34
openflex.append v_k_B = v_B/pds_B
' Real Haig-Simons disposable income in Country A - eq. 12.35 MODIFIED
openflex.append ydhs_k_A = yd_hs_A/pds_A - v_A(-1)*d(pds_A)/pds_A
' Real Haig-Simons disposable income in Country B - eq. 12.36 MODIFIED
openflex.append ydhs_k_B = yd_hs_B/pds_B - v_B(-1)*d(pds_B)/pds_B
' Real consumption in Country A - eq. 12.37
openflex.append c_k_A = alpha1_A*ydhse_k_A + alpha2_A*v_k_A(-1)
' Real consumption in Country B - eq. 12.38
openflex.append c_k_B = alpha1_B*ydhse_k_B + alpha2_B*v_k_B(-1)
' Expected real Haig-Simons disposable income in Country A - eq. 12.39
openflex.append ydhse_k_A = (ydhs_k_A + ydhs_k_A(-1))/2
' Expected real Haig-Simons disposable income in Country B - eq. 12.40
openflex.append ydhse_k_B = (ydhs_k_B + ydhs_k_B(-1))/2
' Real sales in Country A - eq. 12.41
openflex.append s_k_A = c_k_A + g_k_A + x_k_A
' Real sales in Country B - eq. 12.42
openflex.append s_k_B = c_k_B + g_k_B + x_k_B
' Value of sales in Country A - eq. 12.43
openflex.append s_A = s_k_A*ps_A
' Value of sales in Country B - eq. 12.44
openflex.append s_B = s_k_B*ps_B
' Price of sales in Country A - eq. 12.45 MODIFIED
openflex.append ps_A = (p_madeA*(s_k_A - im_k_A - x_k_A)/s_k_A)+px_A*(x_k_A/s_k_A)+pm_A*(im_k_A/s_k_A)
' Price of sales in Country B - eq. 12.46 MODIFIED
openflex.append ps_B = (p_madeB*(s_k_B-im_k_B-x_k_B)/s_k_B)+px_B*(x_k_B/s_k_B)+pm_B*(im_k_B/s_k_B)
'Basic Price of made in Britain goods NEW - eq. 12.44,5 NEW
openflex.append p_madeA = (1 + phi_A)*(w_A*n_A)/y_k_A
'Basic Price of made in Country B goods NEW - eq. 12.44,6 NEW
openflex.append p_madeB = (1 + phi_B)*(w_B*n_B)/y_k_B
' Price of domestic sales in Country A - eq. 12.47
openflex.append pds_A = (s_A - x_A)/(s_k_A - x_k_A)
' Price of domestic sales in Country B - eq. 12.48
openflex.append pds_B = (s_B - x_B)/(s_k_B - x_k_B)
' Domestic sales in Country A - eq. 12.49
openflex.append ds_A = s_A - x_A
' Domestic sales in Country B - eq. 12.50
openflex.append ds_B = s_B - x_B
' Real domestic sales in Country A - eq. 12.51
openflex.append ds_k_A = c_k_A + g_k_A
' Real domestic sales in Country B - eq. 12.52
openflex.append ds_k_B = c_k_B + g_k_B
' Value of output in Country A - eq. 12.53
openflex.append y_A = s_A - im_A
' Value of output in Country B - eq. 12.54
openflex.append y_B = s_B - im_B
' Value of real output in Country A - eq. 12.55
openflex.append y_k_A = s_k_A - im_k_A
' Value of real output in Country B - eq. 12.56
openflex.append y_k_B = s_k_B - im_k_B
' Price of output in Country A - eq. 12.57
openflex.append py_A = y_A/y_k_A
' Price of output in Country B - eq. 12.58
openflex.append py_B = y_B/y_k_B
' Consumption in Country A - eq. 12.59
openflex.append cons_A = c_k_A*pds_A
' Consumption in Country B - eq. 12.60
openflex.append cons_B = c_k_B*pds_B
' Government expenditure in Country A - eq. 12.61
openflex.append g_A = g_k_A*pds_A
' Government expenditure in Country B - eq. 12.62
openflex.append g_B = g_k_B*pds_B
' Note: tax definitions in the book as eqns 12.63 & 12.64 are already as eqns 12.7 & 12.8
' Employment in Country A - eq. 12.65
openflex.append n_A = y_k_A/pr_A
' Employment in Country B - eq. 12.66
openflex.append n_B = y_k_B/pr_B
' ASSET DEMANDS
' Demand for Country A bills in Country A - eq. 12.67
openflex.append b_AA_d = v_A*(lambda10 + lambda11*r_A - lambda12*(r_B + dxre_B))
' Demand for Country B bills in Country A - eq. 12.68
openflex.append b_AB_d = v_A*(lambda20 - lambda21*r_A + lambda22*(r_B + dxre_B))
' Holding of money in Country A - eq. 12.69 MODIFIED
openflex.append h_A_h = v_A - b_AA_s - (b_AB_s*xr_B)
' Demand for Country B bills in Country B - eq. 12.70
openflex.append b_BB_d = v_B*(lambda40 + lambda41*r_B - lambda42*(r_A + dxre_A))
' Demand for Country A bills in Country B - eq. 12.71
openflex.append b_BA_d = v_B*(lambda50 - lambda51*r_B + lambda52*(r_A + dxre_A))
' Holding of money in Country B - eq. 12.72 MODIFIED
openflex.append h_B_h = v_B - b_BB_s - (b_BA_s*xr_A)
' Note - we follow eqns numbering in the text...
' Expected change in Country A exchange rate - eq. 12.75
' openflex.append dxre_A = (xre_A - xr_A(-1))/xr_A
' Expected change in Country B exchange rate - eq. 12.76
' openflex.append dxre_B = (xre_B - xr_B(-1))/xr_B
' ASSET SUPPLIES
' Suply of cash in Country B - eq. 12.77 MODIFIED
openflex.append h_B_s = h_B_h
' Supply of Country B bills to Country B - eq. 12.78
openflex.append b_BB_s = b_BB_d
' Supply of Country B bills to Country B Central bank - eq. 12.79
openflex.append b_cb_BB_s = b_cb_BB_d
' Suply of cash in Country A - eq. 12.80 MODIFIED
openflex.append h_A_s = h_A_h
' Bills issued by Country B acquired by Country B - eq. 12.81
openflex.append b_AA_s = b_AA_d
' Supply of Country A bills to Country A Central bank - eq. 12.82
' MODLER MACRO VERSION
openflex.append b_cb_AA_s = b_cb_AA_d
' BOOK VERSION - eq. 12.82A
' openflex.append b_cb_AA_s = b_A_s - b_AA_s - b_BA_s
' Balance sheet of Country B Central bank - eq. 12.83 - expressed as changes
openflex.append b_cb_BB_d = b_cb_BB_d(-1) + d(h_B_s) - d(or_B)*pg_B
' Balance sheet of Country A Central bank - eq. 12.84
openflex.append b_cb_AA_d = b_cb_AA_d(-1) + d(h_A_s) - d(b_cb_AB_s)*xr_B - d(or_A)*pg_A
' Price of gold is equal in the two countries - eq. 12.85
openflex.append pg_A = pg_B/xr_A
' Country B exchange rate - eq. 12.86
openflex.append xr_B = 1/xr_A
' Equilibrium condition for bills issued by Country A acquired by Country B - eq. 12.87
openflex.append b_BA_s = b_BA_d*xr_B
' Equilibrium condition for bills issued by Country B acquired by Country A Central bank - eq. 12.88
openflex.append b_cb_AB_d = b_cb_AB_s*xr_B
' Country A Exchange rate - eq. 12.89FL
openflex.append xr_A = b_AB_s/b_AB_d
' Supply of Country A bills to CountryS - eq. 12.90FL
openflex.append b_AB_s = b_B_s - b_BB_s - b_cb_BB_d - b_cb_AB_s
' Government deficit in the Country A
openflex.append psbr_A = g_A + r_A(-1)*b_A_s(-1) - t_A - f_cb_A
' Government deficit in Country B
openflex.append psbr_B = g_B + r_B(-1)*b_B_s(-1) - t_B - f_cb_B
' Net accumulation of financial assets in the Country A
openflex.append nafa_A = psbr_A + cab_A
' Net accumulation of financial assets in Country B
openflex.append nafa_B = psbr_B + cab_B
'End of the model
smpl 1952 @last
' Select the baseline Scenario
openflex.scenario Baseline
openflex.solve(i=p)
'CREATE NEW SHOCKS ON PASS-THROUGH COEFFICIENTS
'1. VERY LOW PASS-THROUGH
openflex.scenario "Scenario 1"
openflex.override nu1x nu1m
copy nu1x nu1x_1
copy nu1m nu1m_1
smpl 2020 @last
nu1x_1 = 0.7 'from 0.5
nu1m_1 = 0.3 'from 0.7
smpl @all
openflex.solve
'2. LOW PASS-THROUGH
openflex.scenario(n) "Scenario 2"
openflex.override nu1x nu1m
copy nu1x nu1x_2
copy nu1m nu1m_2
smpl 2020 @last
nu1x_2 = 0.6 'from 0.5
nu1m_2 = 0.4 'from 0.7
smpl @all
openflex.solve
'3. FAIRLY LOW PASS-THROUGH
openflex.scenario(n) "Scenario 3"
openflex.override nu1x nu1m
copy nu1x nu1x_3
copy nu1m nu1m_3
smpl 2020 @last
nu1x_3 = 0.4 'from 0.5
nu1m_3 = 0.6 'from 0.7
smpl @all
openflex.solve
'4. FAIRLY HIGH PASS-THROUGH
openflex.scenario(n) "Scenario 4"
openflex.override nu1x nu1m
copy nu1x nu1x_4
copy nu1m nu1m_4
smpl 2020 @last
nu1x_4 = 0.3 'from 0.5
nu1m_4 = 0.7 'from 0.7
smpl @all
openflex.solve
'5. HIGH PASS-THROUGH
openflex.scenario(n) "Scenario 5"
openflex.override nu1x nu1m
copy nu1x nu1x_5
copy nu1m nu1m_5
smpl 2020 @last
nu1x_5 = 0.2 'from 0.5
nu1m_5 = 0.8 'from 0.7
smpl @all
openflex.solve
'6. VERY HIGH PASS-THROUGH
openflex.scenario(n) "Scenario 6"
openflex.override nu1x nu1m
copy nu1x nu1x_6
copy nu1m nu1m_6
smpl 2020 @last
nu1x_6 = 0.1 'from 0.5
nu1m_6 = 0.9 'from 0.7
smpl @all
openflex.solve
'7. ML CONDITION
openflex.scenario(n) "Scenario 7"
openflex.override nu1x nu1m
copy nu1x nu1x_7
copy nu1m nu1m_7
smpl 2020 @last
nu1x_7 = 0 'from 0.5
nu1m_7 = 1 'from 0.7
smpl @all
openflex.solve
'8. Fall in country A propensity to export
openflex.scenario(n) "Scenario 8"
openflex.override eps0
copy eps0 eps0_8
smpl 2020 @last
eps0_8 = -2.2 'from -2.1
smpl @all
openflex.solve
'9. Fall in country A propensity to export with very low pass-through
openflex.scenario(n) "Scenario 9"
openflex.override eps0 nu1x nu1m