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More flexibility with changes in spending policy #983

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jdebacker opened this issue Sep 6, 2024 · 1 comment
Closed

More flexibility with changes in spending policy #983

jdebacker opened this issue Sep 6, 2024 · 1 comment

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@jdebacker
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OG-Core allows users to specify gov't spending on non-pension transfers ($TR_t$), infrastructure ($I_{g,t}$), and gov't consumption expenditures ($G_t$) by providing the ratio of spending on these items to GDP with the parameters $\alpha_{tr,t}$, $\alpha_{G,t}$, and $\alpha_{I,t}$. This is helpful for calibrating the model as one doesn't need to worry about units of measurement.

However, this imposes a very specific assumption when looking at counterfactual scenarios. In particular, it implies that these gov't spending amounts grow with the economy (not a bad assumption given what we observe in the US, but it is limiting).

The parameter baseline_spending can hold spending amounts in the counterfactual simulation at the same level as in the baseline run. This allows one to avoid the assumption that the amount of spending will grow with the size of the economy.

However, one might wish to make changes in spending policy relative to the baseline level (not the baseline ratio to GDP, which can be done with the current parameters noted above). Thus, it would be useful to create 3 new share parameters that could specify the relative change from the baseline level of spending that would be impose when baseline_spending=True.

@jdebacker
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Resolved with PR #987

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