ASAD_dyn_v10

ASAD_dyn_v10 - EXPLANATION: This model is a computerized...

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Unformatted text preview: EXPLANATION: This model is a computerized version of the AS-AD model in Mankiw, Chapter 14. It is calibrated to data through 2010 and then uses exogenous and assumed data to forecast over the next decade plus. The "base" forecast is pretty much a consensus forecast of macroeconomic forecasters. But don't take it as the word from on high as it will surely be wrong when everything is revealed. Alternative cases are ones in which some policy is changed or some exogenous shock is assumed. So these will differ from the "base" case because of the impact of the change. CASES: The base case in "Basen" shows the simulation with the little model and base assumptions. "Balanced Budget" imposes a balanced high-employment budget in 2015. This is a huge fiscal contraction. "Fed_QE" assumes that the Federal Reserve introduces policies (forward guidance, pancake, etc.) that lower the real interest rate by 50 basis points starting in 2011. OTHER INFORMATION AND INSTRUCTIONS: 1. Things you can change tin any of the spreadsheets: Exogenous or policy variables to be changed (for 2011 on) ε-s ε-d ε-r G* 1. Endogenous variables that are solved by the model: DON’T CHANGE THESE r π (Y-Y*)/Y* i-ff 3. If you want to change the behavior of the model, you can change the following: π* = 2Inflation target coef(i,pi)= 0.5Taylor coeff on inflation coef(i,Y)= 0.5Taylor coeff on output 4. The other sheets are for background and are unimportant data: data for the programs historyq: quarterly data used in the program historym: monthly data used in the program FedBudget: federal budget data. G* Cyclically corrected deficit Parameters α 1 dY/dr φ 0.25 d(pi)/dY contant=-5 Taylor rule: π* = 2 Inflation target r*= 2 Natural rate of interest coef(i,pi)= 0.5 Taylor coeff on inflation coef(i,Y)= 0.5 Taylor coeff on output G multiplier= 1.5 Shocks to system ε-sup [Given] Supply (inflation) shocks ε-d [Given] Demand (G, NX, I) shocks ε-r [Given] Financial crisis shocks (+ is a financial crisis) weight fut i r π (Y-Y*)/Y* ε-s i-ff ε-d ε-r G* 0.1 delta 2004 3.76 2.63-0.40 0.00 1.35 1.61 5.00 3.2 History 1 1.349167 10.96387 25.14656 2.293583 2.71 2005 2.74 3.32 0.20 0.00 3.21 2.17 3.00 2.5 History 0.909091 2.921212 9.967157 23.80665 2.388509 0.61 2006 3.31 3.17 0.39 0.00 4.96 3.70 1.00 2.0 History 0.826446 4.102617 9.061052 20.89385 2.305897-1.31 2007 3.66 2.82-0.21 0.00 5.02 4.71 1.00 1.2 History 0.751315 3.770974 8.23732 16.79888 2.039362-1.04 2008 3.72 3.73-2.68 0.00 1.93-0.16 5.00 2.8 History 0.683013 1.316508 7.488473 13.03486 1.740656 3.26 2009 8.08-0.31-7.50 0.00 0.20-7.35 7.00 7.3 History 0.620921 0.124184 6.807703 11.72467 1.722265 5.28 2010 4.51 1.51-6.56 0.00 0.20-9.54 6.00 7.0 History 0.564474 0.112895 6.18882 11.60623 1.875354 4.12 2011 2.69 0.83-4.73 0.50 0.20-7.00 4.00 5.3 Future 0.513158 0.102632 5.6262 11.49855 2.043751 3.5 2012 2.37 0.34-3.98 0.50 0.20-4.00 3.00 3.6 Future 0.466507 0.093301 5.113042 11.39592 2.228795 3 2013 2.86 0.25-2.34 0.50 0.20-2.00 3.00 3.7 3....
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This note was uploaded on 03/10/2012 for the course ECON 122 taught by Professor Nordhaus during the Fall '10 term at Yale.

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ASAD_dyn_v10 - EXPLANATION: This model is a computerized...

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