' MODEL GROWTH for Eviews version 6
' from Wynne Godley & Marc Lavoie
' MONETARY ECONOMICS
' Chapter 11

' Before running this program you should have used GL11GROWTH
' to create a workfile and a baseline solution

' This program will generate the charts in figures 11.10A to 11.10E
' discussed in par. 11.9.1

smpl @all

' Store original value of shocked value to baseline
genr psiu_0 = psiu

' Increase the proportion of gross investment financed by retained earnings
smpl 1960 @last
psiu = 1
smpl @all

' Select alternative Scenario 10

growth_mod.scenario(n, a="_10") "Scenario 10"

' Set simulation sample
smpl 1947 @last

' Solve the model for the current sample

growth_mod.solve(i=p)

' Store shocked value to scenario
genr psiu_10 = psiu
' and get back shocked variable to its baseline value
psiu = psiu_0

' Creates charts from simulated variables

' Creates the chart in Figure 11.10A
smpl 1955 2020
graph fig11_10a.line phi_10
fig11_10a.options linepat
fig11_10a.setelem(1) lcolor(blue) lwidth(2) lpat(1)
fig11_10a.name(1) Costing margin
fig11_10a.addtext(t,just(c),just(c), font("Arial", 12, +b)) Figure 11.10A: Evolution of the costing margin of firms\nfollowing an increase in the target proportion of investment financed by retained earnings

show fig11_10a

' Creates the chart in Figure 11.10B
smpl 1955 2020
graph fig11_10b.line w_10/w_10(-1)-1
fig11_10b.options linepat
fig11_10b.setelem(1) lcolor(blue) lwidth(2) lpat(1)
fig11_10b.name(1) Wage inflation
fig11_10b.addtext(t,just(c),just(c), font("Arial", 12, +b)) Figure 11.10B: Evolution of wage inflation\nfollowing an increase in the target proportion of investment financed by retained earnings

show fig11_10b

' Creates the chart in Figure 11.10C
smpl 1955 2020
graph fig11_10c.line c_k_10/c_k_0 er_10/er_0
fig11_10c.options linepat
fig11_10c.setelem(1) lcolor(blue) lwidth(2) lpat(1)
fig11_10c.setelem(2) lcolor(green) lwidth(2) lpat(2)
fig11_10c.scale(left) range(0.945, 1.005)
fig11_10c.name(1) Real consumption
fig11_10c.name(2) Employment rate
fig11_10c.addtext(t,just(c),just(c), font("Arial", 12, +b)) Figure 11.10C: Evolution of real consumption and of the employment rate\nfollowing an increase in the target proportion of investment financed by retained earnings

show fig11_10c

' Creates the chart in Figure 11.10D
smpl 1955 2020
graph fig11_10d.line q_10/q_0 pe_10/pe_0
fig11_10d.options linepat
fig11_10d.setelem(1) lcolor(blue) lwidth(2) lpat(1)
fig11_10d.setelem(2) lcolor(green) lwidth(2) lpat(2)
fig11_10d.name(1) Tobin q ratio
fig11_10d.name(2) Price earnings ratio
fig11_10d.addtext(t,just(c),just(c), font("Arial", 12, +b)) Figure 11.10D: Evolution of Tobin's q ratio and the price earnings ratio\nfollowing an increase in the target proportion of investment financed by retained earnings

show fig11_10d

' Creates the chart in Figure 11.10E
smpl 1955 2020
graph fig11_10e.line (p_e_10/p_10)/(p_e_10(-1)/p_10(-1))-1 (f_f_10/p_10)/(f_f_10(-1)/p_10(-1))-1
fig11_10e.options linepat
fig11_10e.setelem(1) lcolor(blue) lwidth(2) lpat(1)
fig11_10e.setelem(2) lcolor(green) lwidth(2) lpat(2)
fig11_10e.name(1) Growth rate of equity prices (deflated)
fig11_10e.name(2) Growth rate of firms profits (deflated)
fig11_10e.addtext(t,just(c),just(c), font("Arial", 12, +b)) Figure 11.10e: Evolution of the growth rates in firms profits and equity prices, both deflated\nfollowing an increase in the target proportion of investment financed by retained earnings

show fig11_10e