#####PARAMETERS alpha1_n = 0.6 alpha1_s = 0.7 alpha2_n = 0.4 alpha2_s = 0.3 lambda0_n = 0.635 lambda0_s = 0.67 lambda1_n = 5 lambda1_s = 6 lambda2_n = 0.01 lambda2_s = 0.07 mu_n = 0.18781 mu_s = 0.18781 theta = 0.2 #####EXOGENOUS g_n = 20 g_s = 20 r_bar = 0.025 r = 0.025 b_h_n = 64.865 b_h_s = 64.865 b_s = 172.74 v_n = 86.487 v_s = 86.487 h_s = 43.244 b_cb = 43.244 #####Add equations to model REG #####Determination of national income in Region N - eq. 6.1 y_n = (cons_n + g_n + x_n)/(1+ mu_n) y_s = (cons_s + g_s + x_s)/(1+ mu_s) im_n = x_s im_s = x_n x_n = mu_s*y_s x_s = mu_n*y_n #####Consumption function - eq. 6.13 cons_n = alpha1_n*yd_n + alpha2_n*v_n(-1) cons_s = alpha1_s*yd_s + alpha2_s*v_s(-1) #####Disposable income - eq. 6.7 yd_n = y_n - t_n + r(-1)*b_h_n(-1) yd_s = y_s - t_s + r(-1)*b_h_s(-1) #####Tax payments - eq. 6.9 t_n = theta*(y_n + r(-1)*b_h_n(-1)) t_s = theta*(y_s + r(-1)*b_h_s(-1)) #####Wealth accumulation - eq. 6.11 v_n = v_n(-1) + (yd_n - cons_n) v_s = v_s(-1) + (yd_s - cons_s) #####Cash money held - eq. 6.15 h_h_n = v_n - b_h_n h_h_s = v_s - b_h_s #####Demand for government bills - eq. 6.17 b_h_n = v_n*(lambda0_n + lambda1_n*r - lambda2_n*(yd_n/v_n)) b_h_s = v_s*(lambda0_s + lambda1_s*r - lambda2_s*(yd_s/v_s)) #####Overall tax payments - eq. 6.19 t = t_n + t_s #####Overall government expenditure - eq. 6.20 g = g_n + g_s #####Total bills outstanding - eq. 6.21 b_h = b_h_n + b_h_s #####Total cash outstanding - eq. 6.22 h_h = h_h_n + h_h_s #####Supply of government bills - eq. 6.23 b_s = b_s(-1) + (g + r(-1)*b_s(-1)) - (t + r(-1)*b_cb(-1)) #####Supply of cash - eq. 6.24 h_s = h_s(-1) + b_cb - b_cb(-1) #####Government bills held by the central bank - eq. 6.25 b_cb = b_s - b_h #####VARIABLES FOR SHOCKS ####CHANGE IN HOUSEHOLD WEALTH HHW=v_s-v_s(-1) #####GOVT BALANCE GOV=t_s-(g_s+r*b_h_s(-1)) ####TRADE BALANCE OF THE S- REGION TBAL= x_s - im_s r=r(-1) timeline 1945 2010