$TITLE HT1: HALL-TAYLOR OPEN ECONOMY FLEXIBLE EXCHANGE. RATE OPTION SYSOUT = OFF; OPTION LIMROW = 0; OPTION LIMCOL = 0; OPTION SOLPRINT = OFF; $OFFSYMXREF OFFSYMLIST *********************************************************************** * This program takes as reference the model: * "agg. demand / price adj. open economy flexible exchg. rate" * as it is defined in Robert Hall and John Taylor's "MACROSOLVE", * the software accompaning their "Macroeconomics" book * (fourth edition, 1993) * * Program developed by Ruben Mercado at the * Department of Economics - The University of Texas at Austin * Austin, TX, June 1996 * *********************************************************************** * This is a static nonlinear model, obtained after eliminating all * time subscripts from the original Hall-Taylor open economy * flexible exchange rate model as it is in MACROSOLVE *********************************************************************** *********************************************************************** *********************************************************************** * * SECTION 1 : DEFINITION OF PARAMETER VALUES FOR THE ORIGINAL * NONLINEAR HALL-TAYLOR MODEL * *********************************************************************** *********************************************************************** *********************************************************************** * The first number indicates "equation number" and the second * indicates "parameter number" in the equation. for example, e2p1 * means "second equation - first parameter (from left to right)" in * the original hall-taylor model * * You can modify the tax rate (between 0.16 and 0.2) for policy analysis. * However, if you modify any other parameter, you will not obtain * comparable results to those of MACROSOLVE, since they are steady- * state invariant. You will be able to introduce comparable parameter's * modifications in the program ht3.gms * *********************************************************************** SCALARS e2p1 constant do not modify / 1 / e2p2 tax rate / 0.1875 / e3p1 minimum consumption / 220 / e3p2 marg prop to consume / 0.7754 / e4p1 maximum investment / 1000 / e4p2 interest elast of invest. / 2000 / e5p0 constant / 0 / e5p1 income elast of money dem. / 0.1583 / e5p2 interest elast of mon dem. / 1000 / e6p1 coeff. on 1 lagged inflation / 0.4 / e6p2 coeff. on 2 lagged inflation / 0.2 / e7p1 coeff. on excess aggr dem / 0.8 / e8p1 constant do not modify / 1 / e9p1 constant / 0.75 / e9p2 constant / 5 / e10p1 constant / 600 / e10p2 income elast of net exp / 0.10 / e10p3 real ex rate elast of net exp / 100 / e11p1 tax rate (same as e2p2) / 0.1875 / e12p1 elast. of empl. w.r.t. GDP / 0.33 / ; *********************************************************************** *********************************************************************** * * SECTION 2: COMPUTATION OF THE STEADY-STATE (BASE-CASE ) VALUES * FOR THE NONLINEAR MODEL * This steady-state solution is the solution of the * original Hall-Taylor Nonlinear Dnamic Model when * time subscripts are eliminated * * You are encouraged to modidy the values of policy and * exogenous variables to analize changes in the steady- * state solution * *********************************************************************** SCALARS Mss money stock / 900 / Gss Gov. expenditure / 1200 / plevwss foreing price level / 1 / YNss potential GDP / 6000 / UNss natural rate of unemployment / 0.05 / ; VARIABLES Yss GDP Css consumption Iss investment YDss disposable income Rss real rate of interest PEss expected inflation Pss inflation Ess nominal exchange rate Xss net exports plevss price level GDss Government deficit Uss Unemployment rate J1 performance index * Note: the performance index does not play any role in this model or * in the models in other sections. It is just a device for GAMS to * compute a solution EQUATIONS ss1 gdp identity ss2 disposable income ss3 consumption ss4 investment ss5 money demand ss6 expected inflation ss7 inflation rate ss8 price level ss9 real exchange rate ss10 net exports ss11 Government deficit ss12 unemployment rate JD1 ; JD1.. J1 =E= 0 ; ss1.. Yss =E= Css + Iss + Gss + Xss ; ss2.. YDss =E= (e2p1 - e2p2) * Yss ; ss3.. Css =E= e3p1 + e3p2 * YDss ; ss4.. Iss =E= e4p1 - e4p2 * Rss ; ss5.. Rss =E= (e5p0 + e5p1 * Yss - Mss / plevss) * (1 / e5p2) ; ss6.. PEss =E= e6p1 * Pss + e6p2 * Pss ; ss7.. Pss =E= Pess + e7p1 * (Yss - YNss) / YNss ; ss8.. plevss =E= plevss * (e8p1 + Pss) ; ss9.. Ess =E= e9p1 * (plevwss / plevss) + e9p2 * Rss * (plevwss / plevss) ; ss10.. Xss =E= e10p1 - e10p2 * Yss - e10p3 * ( Ess * plevss / plevwss) ; ss11.. GDss =E= Gss - e11p1 * Yss ; ss12.. Uss =E= UNss - e12p1 * (Yss - YNss) / YNss ; plevss.LO = 0.01; MODEL STEADYST / ss1, ss2, ss3, ss4, ss5, ss6, ss7, ss8, ss9, ss10,ss11,ss12, JD1 / ; SOLVE STEADYST MAXIMIZING J1 USING NLP; DISPLAY Yss.L , YDss.L, Css.L, Iss.L, Rss.L, PEss.L, Pss.L, plevss.L, Ess.L, Xss.L , GDss.L, Uss.L ;