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Italy_SFC_2019
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' MODEL ItalySFC for Eviews version 6 to 10
' by Marco Veronese Passarella
' Contents: This code replicates the simulations performed in Veronese Passarella, M. (2020) From abstract to concrete: some tips for developing an empirical SFC Model,
' European Journal of Economics and Economic Policies: Intervention, 16(1), pp. 55-93.
' ****************************************************************************
'Developed on: October 6, 2018
'Revised on: March 17, 2020
' ****************************************************************************
' Copyright (c) 2017 Marco Veronese Passarella
' Permission is hereby granted, free of charge, to any person obtaining a
' copy of this software and associated documentation files (the "Software"),
' to deal in the Software without restriction, including without limitation
' the rights to use, copy, modify, merge, publish, distribute, sublicense,
' and/or sell copies of the Software, and to permit persons to whom the
' Software is furnished to do so, subject to the following conditions:
' The above copyright notice and this permission notice shall be included in
' all copies or substantial portions of the Software.
' THE SOFTWARE IS PROVIDED "AS IS", WITHOUT WARRANTY OF ANY KIND, EXPRESS OR
' IMPLIED, INCLUDING BUT NOT LIMITED TO THE WARRANTIES OF MERCHANTABILITY,
' FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. IN NO EVENT SHALL THE
' AUTHORS OR COPYRIGHT HOLDERS BE LIABLE FOR ANY CLAIM, DAMAGES OR OTHER
' LIABILITY, WHETHER IN AN ACTION OF CONTRACT, TORT OR OTHERWISE, ARISING
' FROM, OUT OF OR IN CONNECTION WITH THE SOFTWARE OR THE the USE OR OTHER DEALINGS
' IN THE SOFTWARE.
' ****************************************************************************
'Create workfile: annual data from 1996 to 2030 (named 'ItalySFC')
wfcreate(wf = ItalySFC) a 1996 2030
'Upload time series (actual figures) to be compared with forecasted values (note: '_ts' means 'time series")
'a) GDP AND CAPITAL DEFLATORS (PRICES) ---------------------------------------------------------------------------------------------------------------------------------
read(b2, s=price) "C:\Users\...\Italy data.xls" p_y_ts p2_y_ts p_k_ts p_h_ts newhouse_d_ts house_s_ts
'b) HOUSEHOLDS -------------------------------------------------------------------------------------------------------------------------------
read(b2, s=households) "C:\Users\...\Italy data.xls" yyd_h_ts ggdp_h_ts wwb_ts ttau_h_ts iint_h_ts tt_h_ts aann_ts pprop_h_ts ccons_h_ts nnw_h_ts dd_h_ts mmort_h_ts iinv_h_ts nnl_h_ts ffunds_h_ts hhouse_h_ts oofin_h_ts bb_h_ts nnfw_h_ts wwb_h_p_ts iint_hpaid_ts iint_hrecv_ts
'Create real series (note: for the sake of simplicity, I use the same deflator for all magnitudes. Needless to say, this is not accurate. I would suggest using data at constant prices here)
series yd_h_ts = yyd_h_ts*100/p_y_ts
series gdp_h_ts = ggdp_h_ts*100/p_y_ts
series wb_ts = wwb_ts*100/p_y_ts
series tau_h_ts = ttau_h_ts*100/p_y_ts
series int_h_ts = iint_h_ts*100/p_y_ts
series t_h_ts = tt_h_ts*100/p_y_ts
series ann_ts = aann_ts*100/p_y_ts
series prop_h_ts = pprop_h_ts*100/p_y_ts
series cons_h_ts = ccons_h_ts*100/p_y_ts
series nw_h_ts = nnw_h_ts*100/p_y_ts
series d_h_ts = dd_h_ts*100/p_y_ts
series mort_h_ts = mmort_h_ts*100/p_y_ts
series inv_h_ts = iinv_h_ts*100/p_y_ts
series nl_h_ts = nnl_h_ts*100/p_y_ts
series funds_h_ts = ffunds_h_ts*100/p_y_ts
series house_h_ts = hhouse_h_ts*100/p_y_ts
series ofin_h_ts = oofin_h_ts*100/p_y_ts
series b_h_ts = bb_h_ts*100/p_y_ts
series nfw_h_ts = nnfw_h_ts*100/p_y_ts
series wb_h_p_ts = wwb_h_p_ts*100/p_y_ts
series int_hpaid_ts = iint_hpaid_ts*100/p_y_ts
series int_hrecv_ts = iint_hrecv_ts*100/p_y_ts
'c) NFCs (AND OTHER) -------------------------------------------------------------------------------------------------------------------------
read(b2, s=nfc) "C:\Users\...\Italy data.xls" ggdp_ts kk_synth iinv_f_ts iinv_tot_ts r_lf_ts r_z_ts gg_k_synth dd_f_ts yy_ts eexport_ts ggov_ts n_ts iimp_ts ner_ts ccons_int_ts nnet_tau_tot_ts ppi_f_ts ggdp_b_ts ggdp_row_ts ggdp_f_ts iint_f_ts wwb_other_ts oopaym_f_ts ppi_fu_ts ddiv_f_ts ttau_f_ts ttransf_f_ts tt_f_ts ffunds_f_ts pprop_f_ts ddiv_h_ts ddiv_b_ts ddiv_row_ts r_v_ts vv_f_ts vv_b_ts vv_h_ts vv_g_ts vv_row_ts ll_f_ts xi_b_ts p_v_synth nnl_f_ts nnw_f_ts research_ts yy_n_synth gg_n_synth
'Create real series
series gdp_ts = ggdp_ts*100/p_y_ts
series k_synth = kk_synth*100/p_y_ts
series inv_f_ts = iinv_f_ts*100/p_y_ts
series inv_tot_ts = iinv_tot_ts*100/p_y_ts
series d_f_ts = dd_f_ts*100/p_y_ts
series y_ts = yy_ts*100/p_y_ts
series export_ts = eexport_ts*100/p_y_ts
series gov_ts = ggov_ts*100/p_y_ts
series imp_ts = iimp_ts*100/p_y_ts
series cons_int_ts = ccons_int_ts*100/p_y_ts
series net_tau_tot_ts = nnet_tau_tot_ts*100/p_y_ts
series pi_f_ts = ppi_f_ts*100/p_y_ts
series gdp_b_ts = ggdp_b_ts*100/p_y_ts
series gdp_row_ts = ggdp_row_ts*100/p_y_ts
series gdp_f_ts = ggdp_f_ts*100/p_y_ts
series int_f_ts = iint_f_ts*100/p_y_ts
series wb_other_ts = wwb_other_ts*100/p_y_ts
series opaym_f_ts = oopaym_f_ts*100/p_y_ts
series pi_fu_ts = ppi_fu_ts*100/p_y_ts
series div_f_ts = ddiv_f_ts*100/p_y_ts
series tau_f_ts = ttau_f_ts*100/p_y_ts
series transf_f_ts = ttransf_f_ts*100/p_y_ts
series t_f_ts = tt_f_ts*100/p_y_ts
series funds_f_ts = ffunds_f_ts*100/p_y_ts
series prop_f_ts = pprop_f_ts*100/p_y_ts
series div_h_ts = ddiv_h_ts*100/p_y_ts
series div_b_ts = ddiv_b_ts*100/p_y_ts
series div_row_ts = ddiv_row_ts*100/p_y_ts
series v_f_ts = vv_f_ts*100/p_y_ts
series v_b_ts = vv_b_ts*100/p_y_ts
series v_h_ts = vv_h_ts*100/p_y_ts
series v_g_ts = vv_g_ts*100/p_y_ts
series v_row_ts = vv_row_ts*100/p_y_ts
series l_f_ts = ll_f_ts*100/p_y_ts
series nl_f_ts = nnl_f_ts*100/p_y_ts
series nw_f_ts = nnw_f_ts*100/p_y_ts
series y_n_synth = yy_n_synth*100/p_y_ts
series g_k_synth = d(k_synth)/k_synth(-1)
series g_n_synth = d(y_n_synth)/y_n_synth(-1)
series e_imp_ts = ((d(imp_ts)/imp_ts(-1))/(d(y_ts)/y_ts(-1)))
series yd_f_ts = gdp_f_ts - wb_ts - tau_f_ts - int_f_ts + t_f_ts - prop_f_ts - div_f_ts
'd) GOVERNMENT ---------------------------------------------------------------------------------------------------------------------------------
read(b2, s=gov) "C:\Users\...\Italy data.xls" r_b_ts bb_g_ts bb_f_ts bb_row_ts bb_b_ts ggdp_g_ts ccons_g_ts iinv_g_ts wwb_g_ts ttau_tot_ts tt_tot_ts ddiv_g_ts iint_g_ts pprop_g_ts ffunds_g_ts nnl_g_ts r_ba_ts p_b_synth nnw_g_ts ll_g_ts dd_g_ts edu_ts research_g_ts ddebt_g_ts
'Create real series
series b_g_ts = bb_g_ts*100/p_y_ts
series b_f_ts = bb_f_ts*100/p_y_ts
series b_row_ts = bb_row_ts*100/p_y_ts
series b_b_ts = bb_b_ts*100/p_y_ts
series gdp_g_ts = ggdp_g_ts*100/p_y_ts
series cons_g_ts = ccons_g_ts*100/p_y_ts
series inv_g_ts = iinv_g_ts*100/p_y_ts
series wb_g_ts = wwb_g_ts*100/p_y_ts
series tau_tot_ts = ttau_tot_ts*100/p_y_ts
series t_tot_ts = tt_tot_ts*100/p_y_ts
series div_g_ts = ddiv_g_ts*100/p_y_ts
series int_g_ts = iint_g_ts*100/p_y_ts
series prop_g_ts = pprop_g_ts*100/p_y_ts
series funds_g_ts = ffunds_g_ts*100/p_y_ts
series nl_g_ts = nnl_g_ts*100/p_y_ts
series nw_g_original_ts = nnw_g_ts*100/p_y_ts
series l_g_ts = ll_g_ts*100/p_y_ts
series d_g_ts = dd_g_ts*100/p_y_ts
series debt_g_ts = ddebt_g_ts*100/p_y_ts
series int_f_res_ts = int_f_ts - (r_lf_ts(-1)/100*l_f_ts(-1) + r_ba_ts/100*(-b_f_ts(-1)))
series nw_g_ts = nw_g_original_ts
'e) FINANCIAL SECTOR ---------------------------------------------------------------------------------------------------------------------------------
read(b2, s=banks) "C:\Users\...\Italy data.xls" ggdp_b_ts iinv_b_ts wwb_b_ts ttau_b_ts ddiv_b_ts iint_b_ts pprop_b_ts tt_b_ts ffunds_b_ts nnl_b_ts ppi_b_ts nnw_b_ts ll_b_ts dd_b_ts r_ecb_ts
'Create real series
series gdp_b_ts = ggdp_b_ts*100/p_y_ts
series inv_b_ts = iinv_b_ts*100/p_y_ts
series wb_b_ts = wwb_b_ts*100/p_y_ts
series tau_b_ts= ttau_b_ts*100/p_y_ts
series ddiv_b_ts = div_b_ts*100/p_y_ts
series int_b_ts = iint_b_ts*100/p_y_ts
series prop_b_ts = pprop_b_ts*100/p_y_ts
series t_b_ts = tt_b_ts*100/p_y_ts
series funds_b_ts = ffunds_b_ts*100/p_y_ts
series nl_b_ts = nnl_b_ts*100/p_y_ts
series pi_b_ts = ppi_b_ts*100/p_y_ts
series nw_b_ts = nnw_b_ts*100/p_y_ts
series l_b_ts = ll_b_ts*100/p_y_ts
series d_b_ts = dd_b_ts*100/p_y_ts
series v_b_iss_ts = @recode(v_b_ts<0,v_b_ts,0)
series v_b_pur_ts = @recode(v_b_ts<0,1,v_b_ts) 'Note: I put 1 (instead of 0) to avoid negative log issues
series nfw_b_ts = nw_b_ts*(1-0.008) + (-d_b_ts) 'Note: 0.008 is the value of nu_kb
series div_b_recv_ts = @recode(div_b_ts>0,div_b_ts,0)
series div_b_paid_ts = @recode(div_b_ts>0,0,div_b_ts)
'f) REST OF THE WORLD ---------------------------------------------------------------------------------------------------------------------------------
read(k2, s=row) "C:\Users\...\Italy data.xls" nnl_row_ts nnw_row_ts ll_row_ts dd_row_ts tt_row_ts ttau_row_ts
'Create real series
series nl_row_ts = nnl_row_ts*100/p_y_ts
series nw_row_ts = nnw_row_ts*100/p_y_ts
series l_row_ts = ll_row_ts*100/p_y_ts
series d_row_ts = dd_row_ts*100/p_y_ts
series t_row_ts = tt_row_ts*100/p_y_ts
series tau_row_ts = ttau_row_ts*100/p_y_ts
series v_row_pur_ts = 0 '@recode(v_row_ts<0,0,v_row_ts)
series div_row_recv_ts = @recode(div_row_ts>0,div_row_ts,0)
'g) FIXED CAPITAL AND DWELLINGS ---------------------------------------------------------------------------------------------------------------------------------
read(b2, s=fixed capital) "C:\Users\...\Italy data.xls" kk_tot_ts gg_k_ts hhouse_tot_ts nu_kb_ts nu_kf_ts nu_kg_ts nu_kh_ts nu_hb_ts nu_hf_ts nu_hg_ts nu_hh_ts k_grow_ts u_ts ddiv_tot_ts
'Create real series
series k_tot_ts = kk_tot_ts*100/p_y_ts
series house_tot_ts = hhouse_tot_ts*100/p_y_ts
series div_tot_ts = ddiv_tot_ts*100/p_y_ts
series g_k_ts = d(k_tot_ts)/k_tot_ts(-1)
'i) ADDITIONAL SERIES
series ofin_f_ts = d_f_ts + (-v_f_ts) - l_f_ts + (-b_f_ts) - nw_f_ts 'NFCs' additional financial and non-financial assets (including dwellings)
series ofin_b_ts = (-d_b_ts) + v_b_ts - (-l_b_ts) + b_b_ts - nw_b_ts 'Financial sector's additional financial and non-financial assets (including dwellings)
series ofin_g_ts = nw_g_ts - (d_g_ts + v_g_ts - l_g_ts + (-b_g_ts)) 'Government's additional financial and non-financial assets (including dwellings)
series v_tot_ts = v_f_ts+v_b_iss_ts+v_row_ts 'Total equity and shares
series v_fh_ts = (v_f_ts/v_tot_ts)*v_h_ts 'NFC equity and shares held by households
series cg_h_ts = nw_h_ts - nw_h_ts(-1) - yd_h_ts + cons_h_ts + inv_h_ts - funds_h_ts 'Capital gains realised by households
series cg_b_ts = nw_b_ts - nw_b_ts(-1) - pi_b_ts + inv_b_ts 'Capital gains realised by financial institutions
series cg_f_ts = nw_f_ts - nw_f_ts(-1) - yd_f_ts + inv_f_ts - funds_f_ts 'Capital gains realised by NFCs
series cg_g_ts = nw_g_ts - nw_g_ts(-1) - nl_g_ts 'Capital gains realised by government
' ****************************************************************************
'Create and label series (endogenous variables, exogenous variables and other parameters)
'a) HOUSEHOLDS -------------------------------------------------------------------------------------------------------------------------
series cons_h
cons_h.label(d) Household consumption
series yd_h
yd_h.label(d) Household disposable income
series nw_h
nw_h.label Households net wealth
series nfw_h
nfw_h.label Households financial assets
series c_int
c_int.label(d) Share of intermediate consumption to total production
series dummy
dummy.label(d) Crisis dummy
series mort_h
mort_h.label(d) Household mortgages
series house_h
house_h.label(d) Dwellings (stock) held by households
series inv_h
inv_h.label(d) Housing investment
series tau_h
tau_h.label(d) Tax burden on households
series theta_h
theta_h.label(d) Average tax rate on household income
series wb
wb.label(d) Household wages
series gdp
gdp.label(d) Total GDP of the economy
series gdp_h
gdp_h.label(d) Household GDP
series beta_h
beta_h.label(d) Share of household GDP to total GDP
series alpha_h_t
alpha_h_t.label(d) Household transfers to wages ratio
series alpha_h_p
alpha_h_p.label(d) Hosehold net property income to wages ratio
series alpha_h_i
alpha_h_i.label(d) Households interests to wages ratio
series n
n.label(d) Total employment (20 to 64 years)
series y
y.label(d) Total gross product
series prod_l
prod_l.label(d) Gross product per employee
series funds_h
funds_h.label(d) Adjustment in household funds
series alpha_h_fu
alpha_h_fu.label(d) Adjustment in household funds to disposable income ratio
series nl_h
nl_h.label(d) Household net lending
series n_init
n_init.label(d) Initial employment (1996)
series g_n
g_n.label(d) Potential growth rate
series int_h
int_h.label(d) Net interest received by households
series int_hpaid
int_hpaid.label(d) Total interests paid by households
series int_hrecv
int_hrecv.label(d) Total interests received by households
series d_h
d_h.label(d) Bank deposits held by households
series v_h
v_h.label(d) Equity held by households (net stock)
series b_h
b_h.label(d) Securities held by households (net stock)
series ofin_h
ofin_h.label(d) Other financial assets held by households (net stock)
series perc_ofin_h
perc_ofin_h.label(d) Percentage of other financial assets held by households (net stock) '^^^^^NEW
series zeta
zeta.label(d) Profit share to GDP
series omega_tot
omega_tot.label(d) Wage share to GDP
series omega_lab
omega_lab.label(d) Labour income share to GDP
series omega_s
omega_s.label(d) Share of wages paid by NPISH to total wages
series omega_o
omega_o.label(d) Share of wages paid by non-productive sectors to total wages
series ann
ann.label(d) Overall annuities received by households
series div_h
div_h.label(d) Total (net) dividends received by households
series div_fh
div_fh.label(d) Net dividends paid by NFCs to households
series div_bh
div_bh.label(d) Net dividends paid by financial institutions to households
series div_rowh
div_rowh.label(d) Net dividends paid by foreign corporations to households
series prop_h
prop_h.label(d) Other property income received by households
series t_h
t_h.label(d) Net transfers received by households (benefits, subsidies, etc.)
series v_fh
v_fh.label(d) NFC equity held by households
series x_f
x_f.label(d) NFC equity to total equity
series v_bh
v_bh.label(d) Financial institutions equity held by households
series x_b
x_b.label(d) Financial institutions equity to total equity
series v_rowh
v_rowh.label(d) Foreign corporations equity held by households
series r_h
r_h.label(d) Property income rate
series q_f
q_f.label(d) NFC securities to total securities
series q_gf
q_gf.label(d) Net percentage of Government bonds purchased by NFCs (before 2003)
series v_tot
v_tot.label(d) Total equity and shares of the economy
series b_tot
b_tot.label(d) Total securities (other than shares) of the economy
series residuals_h
residuals_h.label(d) Household net lending residuals (up until 2016)
series b_fh
b_fh.label(d) NFC securities held by households
series b_gh
b_gh.label(d) Government bonds held by households
'b) NFCs -------------------------------------------------------------------------------------------------------------------------
series gdp_f
gdp_f.label(d) GDP associated with firms
series g_prod
g_prod.label(d) Growth rate of productivity
series k_tot
k_tot.label(d) Stock of productive capital
series delta_k
delta_k.label(d) Capital depreciation rate
series delta_f
delta_f.label(d) NFC investment to total investment
series inv_f
inv_f.label(d) Investment undertaken by NFCs
series inv_tot
inv_tot.label(d) Total current investment
series g_k
g_k.label(d) Capital growth rate (NFC investment rate)
series beta_f
beta_f.label(d) Share of NFC GDP to total GDP
series r_lf
r_lf.label(d) Interest rate on loans to NFCs
series r_z
r_z.label(d) Risk-free interest rate (10-year German bunds)
series i_t
i_t.label(d) ECB Policy rate
series d_f
d_f.label(d) Deposits held by NFCs
series y_ad
y_ad.label(d) Aggregate demand
series gov_sp
gov_sp.label(d) Government spending net of interest payments
series gov_rev
gov_rev.label(d) Total government spending revenue
series export
export.label(d) Export
series imp
imp.label(d) Import
series ner
ner.label(d) Nominal exchange rate
series pi_f
pi_f.label(d) Profits of NFCs
series tau_f
tau_f.label(d) Taxes paid by NFCs
series transf_f
transf_f.label(d) Subsidies and transfers to/from NFCs (including capital transfers)
series int_f
int_f.label(d) Net interest received by NFCs
series r_d
r_d.label(d) Interest rate on bank deposits
series l_f
l_f.label(d) Loans to NFCs
series pi_fu
pi_fu.label(d) Retained profits of NFCs
series s_f
s_f.label(d) NFC profit retention rate
series div_f
div_f.label(d) Total dividends paid by NFCs
series theta_f
theta_f.label(d) Tax rate paid by NFC
series v_f
v_f.label(d) NFC Total equity stock
series div_fb
div_fb.label(d) NFC Dividends paid to domestic financial sector
series v_fb
v_fb.label(d) NFC Equity held by domestic financial sector
series div_frow
div_frow.label(d) NFC dividends paid to foreign investors
series v_frow
v_frow.label(d) NFC equity held by foreign investors
series div_fg
div_fg.label(d) NFC net dividends paid to government sector
series v_fg
v_fg.label(d) NFC equity held by government sector
series v_f_r
v_f_r.label(d) Volume of NFC new equity issued to fund investment
series p_v
p_v.label(d) Price of NFC new equity issued to fund investment
series psi
psi.label(d) Share of investment funded by equity
series npl
npl.label(d) Loans write offs
series nl_f
nl_f.label(d) NFC net lending
series xi_b
xi_b.label(d) Percentage of non-performing bank loans
series xi_f
xi_f.label(d) Percentage of NPBL which become NFC loan write offs
series eta_f
eta_f.label(d) Extra-growth of NFC deposits compared with GDP
series cons_int
cons_int.label(d) Intermediate consumption (total)
series net_tau_tot
net_tau_tot.label(d) Total taxes on products net of subsidies
series wb_other
wb_other.label(d) Wages paid by non-productive sectors
series opaym_f
opaym_f.label(d) Other payments made by NFCs
series gdp_g
gdp_g.label(d) Government GDP
series gdp_row
gdp_row.label(d) Rest of the world GDP component
series alpha_f_t
alpha_f_t.label(d) NFC subsidies and transfers to profit rate
series t_f
t_f.label Current subsidies and transfers to/from NFCs
series funds_f
funds_f.label NFC adjustment in funds
series prop_f
prop_f.label Other property income to/from NFCs
series alpha_f_o
alpha_f_o.label(d) Other property income to profit ratio
series r_v
r_v.label(d) Share prices index
series nw_f
nw_f.label NFC net wealth
series nfw_f
nfw_f.label NFC financial assets holdings
series yd_f
yd_f.label NFC disposable income
series ofin_f
ofin_f.label(d) Other financial and non-financial assets held by NFCs (net stock)
series b_f
b_f.label(d) Securities issued by NFCs (net stock)
series alpha_f_fu
alpha_f_fu.label(d) NFC adjustment in funds to profit ratio
series int_f_res
int_f_res.label(d) Other net interest payments from/to NFCs
series b_gf
b_gf.label(d) Net government bonds purchased by NFCs (up until 2003)
series int_fb
int_fb.label(d) Interest paid by NFCs to financial sector
series int_fh
int_fh.label(d) Interest paid by NFCs to households
series int_frow
int_frow.label(d) Interest paid by NFCs to RoW
series xi_inv
xi_inv.label(d) % of investment that goes to waste
series percd
percd.label(d) % of new loans to firms that turn into deposits & cash
series y_n
y_n.label(d) Potential output
series y_n_l
y_n_l.label(d) Potential output (labour component)
series y_n_k
y_n_k.label(d) Potential output (capital component)
series prod_k
prod_k.label(d) Output to capital ratio
series p_k
p_k.label(d) Capital deflator
series p_y
p_y.label(d) GDP deflator (price index)
series inflat
inflat.label(d) Inflation (output)
series residuals_f
residuals_f.label(d) NFC net lending residuals
series divper_f
divper_f.label(d) Percentage of total dividends paid by NFCs
series perc_ofin_f
perc_ofin_f.label(d) Percentage of other assets held by NFCs (net stock)
'c) GOVERNMENT -------------------------------------------------------------------------------------------------------------------------
series r_b
r_b.label(d) 10-year government bond yields (%)
series r_ba
r_ba.label(d) Average government bond yields (%)
series b_g
b_g.label(d) 10-year government bonds
series nl_g
nl_g.label(d) Government net lending
series int_g
int_g.label(d) Government interest payments
series int_g_res
int_g_res.label(d) Government interest payments (residual component)
series gdp_g
gdp_g.label(d) Government GDP
series cons_g
cons_g.label(d) Government consumption
series inv_g
inv_g.label(d) Government investment
series wb_g
wb_g.label(d) Government wages
series tau_tot
tau_tot.label(d) Total tax revenue
series t_tot
t_tot.label(d) Total transfers, benefits and subsidies
series div_g
div_g.label(d) Dividends received by the government
series prop_g
prop_g.label(d) Government other property income
series funds_g
funds_g.label(d) Government funds adjustments
series gov
gov.label(d) Government total expenditure
series beta_g
beta_g.label(d) Share of government GDP to total GDP
series spread
spread.label(d) Spread between Italian and German bond yields
series m
m.label(d) Mark-up of Italian bond rate over German bond rate
series spread_av
spread_av.label(d) Spread between Italian bond average rate and German bond rate
series m_av
m_av.label(d) Mark-up of Italian bond average rate over German bond rate
series alpha_g_c
alpha_g_c.label(d) Government consumption share of GDP
series v_g
v_g.label(d) Net equity held by government sector
series v_fg
v_fg.label(d) Net NFC equity held by government sector
series alpha_g_i
alpha_g_i.label(d) Government investment share of GDP
series b_g_r
b_g_r.label(d) Real supply of government bonds
series p_b
p_b.label(d) Price of government bonds
series gbills
gbills.label(d) Nominal supply of government bills
series omega_g
omega_g.label(d) Government wage share of GDP
series alpha_g_v
alpha_g_v.label(d) Government equity holdings to GDP ratio
series alpha_g_p
alpha_g_p.label(d) Government property income to GDP ratio
series alpha_g_fu
alpha_g_fu.label(d) Government funds adjustment to GDP ratio
series e_g
e_g.label(d) Share of accounting dividends received by government
series e_b
e_g.label(d) Share of accounting dividends received/paid by financial sector
series e_row
e_row.label(d) Share of RoW dividends paid to households
series theta_tot
theta_tot.label(d) Total (net) taxes on products to gross output
series i_f
i_f.label(d) Share of interests paid by/to firms to total interest payments
series int_gb
int_gb.label(d) Interest paid by Government to financial sector
series int_gh
int_gh.label(d) Interest paid by government to households
series int_grow
int_grow.label(d) Interest paid by government to RoW
series nw_g
nw_g.label(d) Government net wealth
series l_g
l_g.label(d) Government net loans stock
series d_g
d_g.label(d) Government net deposits stock
series eta_lg
eta_lg.label(d) Government loans to net wealth
series eta_dg
eta_dg.label(d) Government deposits to net wealth
series tau_prod
tau_prod.label(d) Taxes on products
series t_prod
t_prod.label(d) Subsidies on products
series residuals_g
residuals_g.label(d) Government net lending residuals
series ofin_g
ofin_g.label(d) Other financial and non-financial assets held by government (net stock)
series perc_ofin_g
perc_ofin_g.label(d) Percentage of other assets held by government (net stock)
series v_bg
v_bg.label(d) Financial sector equity held by government
series v_rowg
v_rowg.label(d) RoW equity held by government
series div_bg
div_bg.label(d) Dividends paid by financial sector to government
'd) FINANCIAL SECTOR -------------------------------------------------------------------------------------------------------------------------
series perc_ofin_b
perc_ofin_b.label(d) Percentage of other assets held by financial sector (net stock) '^^^^^NEW
series gdp_b
gdp_b.label(d) Financial institutions GDP
series beta_b
beta_b.label(d) Share of financial institutions GDP to total GDP
series omega_b
omega_b.label(d) Financial sector wage share to GDP
series tau_b
tau_b.label(d) Total taxes paid by financial sector
series theta_b
theta_b.label(d) Tax rate paid on financial sector profits
series pi_b
pi_b.label(d) Financial sector (retained) profits
series t_b
t_b.label(d) Total transfers to financial sector
series alpha_b_t
alpha_b_t.label(d) Financial sector transfers to profit ratio
series prop_b
prop_b.label(d) Other property income paid by financial sector
series alpha_b_p
alpha_b_p.label(d) Financial sector property income to profit ratio
series funds_b
funds_b.label(d) Financial sector funds adjustment to profit ratio
series alpha_b_fu
alpha_b_fu.label(d) Financial sector funds adjustment to profit ratio
series int_b
int_b.label(d) Financial sector net interest
series d_b
d_b.label(d) Total net bank deposits
series ofin_b
ofin_b.label(d) Other net financial and non-financial assets held by financial sector
series int_b_res
int_b_res.label(d) Additional interest payments from/to financial sector
series perc_int_b_res
perc_int_b_res.label(d) Additional interest payments from/to financial sector as a percentage of other interests
series nw_b
nw_b.label(d) Net wealth of financial sector
series nfw_b
nfw_b.label(d) Net financial assets held by financial sector
series inv_b
inv_b.label(d) Investment undertaken by financial sector
series d_res
d_res.label(d) Bank deposits adjustment
series l_b
l_b.label(d) Total net loans granted by banks
series b_b
nw_b.label(d) Securities held by financial sector
series b_fb
b_fb.label(d) NFC securities held by financial sector
series nw_b
nw_b.label(d) Financial institutions net wealth
series s_b
s_b.label(d) Retention rate of financial sector profit
series l_tot
l_tot.label(d) Total stock of loans
series d_tot
d_tot.label(d) Total stock of deposits
series r_add
r_add.label(d) Risk premium over zero-risk interest rate
series div_rowb
div_rowb.label(d) Net dividends paid by foreign corporations to financial sector
series v_rowb
v_rowb.label(d) Foreign corporations equity held by financial sector
series nl_b
nl_b.label(d) Net lending by the financial sector
series alpha_b_inv
alpha_b_inv.label(d) Financial investment to total (productive) investment ratio
series l_rec
l_rec.label(d) Total accounting loans
series d_rec
d_rec.label(d) Total accounting deposits
series v_b
v_b.label(d) Net equity entry of financial corporations
series residuals_b
residuals_b.label(d) Financial sector net lending residuals
series v_b_iss
v_b_iss.label(d) Net equity issued by financial corporations
series v_b_pur
v_b_pur.label(d) Net equity purchased by financial corporations
series div_b
div_b.label(d) Dividends entry of financial corporations
series div_b_paid
div_b_paid.label(d) Dividends paid by financial corporations
series div_b_recv
div_b_recv.label(d) Dividends received by financial corporations
series divper_b
divper_b.label(d) Percentage of total dividends paid by financial sector
series wb_b
wb_b.label(d) Wages paid by financial sector
series b_gb
b_gb.label(d) Goverment bonds held by RoW
'e) REST OF THE WORLD -------------------------------------------------------------------------------------------------------------------------
series divper_row
divper_row.label(d) Percentage of total dividends paid by RoW
series nl_row
nl_row.label(d) Rest of the world net lending
series nw_row
nw_row.label(d) Rest ot the world net wealth
series l_row
l_row.label(d) Stock of loans to the rest of the world
series d_row
d_row.label(d) Deposits held by the rest of the world
series r_ecb
r_ecb.label(d) Policy rate for Euro Area
series v_row
v_row.label(d) Rest of the world net equity
series div_row
div_row.label(d) Net dividends entry of rest of the world
series div_row_recv
div_row_recv.label(d) Net dividends received by rest of the world
series div_row_paid
div_row_paid.label(d) Net dividends paid by rest of the world
series int_row
int_row.label(d) Net interest received by rest of the world
series t_row
t_row.label(d) Rest of the world transfers
series alpha_row_t
alpha_row_t.label(d) Rest of the world transfers to GDP
series tau_row
tau_row.label(d) Rest of the world tax revenues
series theta_row
theta_row.label(d) Rest of the world tax rate
series e_imp
theta_row.label(d) Output elasticity of import
series b_row
b_row.label(d) Securities held by rest of the world
series div_brow
div_brow.label(d) Dividends paid by financial sector to RoW
series div_rowg
div_rowg.label(d) Dividends paid by RoW to government
series b_frow
b_frow.label(d) NFC securities held by RoW
series b_grow
b_grow.label(d) Government bonds held by RoW
series div_tot
div_tot.label(d) Total dividends
'f) OTHER SERIES -------------------------------------------------------------------------------------------------------------------------
series nu_kb = 0.008
nu_kb.label(d) Banks produced NFA as a percentage of net worth
series nu_kf
nu_kf.label(d) NFC produced NFA as a percentage of net worth 'Note: missing data for original nu_h(i) and nu_k(i) coefficients. Average values 2013-2015 are used.
series lev_h
lev_h.label(d) Household NFW to loans ratio
series lev_f
lev_f.label(d) Firms NFW to loans ratio
series lev2_f
lev2_f.label(d) Firms leverage ratio 'Note: as defined by major institutions
series lev_b
lev_b.label(d) Financial sector NFW to loans ratio
series def_g
def_g.label(d) Government deficit to GDP ratio
series debt_g
debt_g.label(d) Government debt stock to GDP ratio
'HOUSING MARKET
series house_s
house_s.label(d) Supply of new housing (synthetic)
series newhouse_d
newhouse_d.label(d) Housing transactions (number)
series g_H
g_H.label(d) Growth rate of housing stock
series phi_h1
phi_h1.label(d) Parameter in housing demand function
series phi_h2
phi_h2.label(d) Parameter in housing demand function
series p_H
p_H.label(d) Housing price index
series perc_HH
perc_HH.label(d) Parameter in housing price function
series dti
dti.label(d) Debt to income ratio of households
series dti0
dti0.label(d) Parameter in debt to income function
series cg_h
cg_h.label(d) Capital gains realised by households 'Note: CG on housing
series perc_cg_h
perc_cg_h.label(d) Capital gains realised by households as % of net wealth
series cg_h_res
cg_h_res.label(d) Capital gains on other financial assets
series cg_b
cg_b.label(d) Capital gains realised by banks 'Note: CG on T-bonds
series perc_cg_b
perc_cg_b.label(d) Capital gains realised by banks as % of net wealth
series cg_f
cg_f.label(d) Capital gains realised by firms
series perc_cg_f
perc_cg_f.label(d) Capital gains realised by firms as % of net wealth
series cg_g
cg_g.label(d) Capital gains realised by government
series perc_cg_g
perc_cg_g.label(d) Capital gains realised by government as % of net wealth
'g) DUMMY SERIES -------------------------------------------------------------------------------------------------------------------------
series dummy_v_b = @recode(@date<@dateval("2008"),1,0) 'Note: not a real dummy. It allows creating additional series
series dummy_b_f = @recode(@date<@dateval("2003"),0,1) 'Note: not a real dummy. it allows creating additional series
series dummy_prod=@recode(@date>@dateval("2007"),0,1)
'h) ADDITIONAL SERIES -------------------------------------------------------------------------------------------------------------------------
series b_tot_ts = (b_f_ts*dummy_b_f + b_g_ts) 'Total securities (stock) in the economy
series v_tot_ts = (v_f_ts + v_b_ts*dummy_v_b + v_row_ts) 'Total equity and shares (stock) in the economy
series parag 'Note: to be used in cons_g (= 0 under baseline)
parag.label(d) Autonomous government consumption
' ****************************************************************************
' Set sample size to all workfile range
smpl 1996 2030
'Define the set of paramters to be estimated, named p(1), p(2), ..., p(400)
coef(400) p
'I) Estimate parameter values (two simple methods)
'I.a) Create the system of equations for estimation (named 'sys1')
'system sys1
'sys1.append ....
'Estimate parameter values in the system above using SUR method
'sys1.sur(o) ' o = default option, meaning that it iterates only on the coefficient vector with one step of the weighting matrix
'I.b) Use simple OLS estimation equation by equation
'Estimate production function parameters during "normal times" (1996-2008)
smpl 1996 2008
equation eq1.ls(cov=white) log(y_ts) = p(305) + p(306)*@trend + p(307)*log(k_tot_ts)
equation eq2.ls(cov=white) log(y_ts) = p(308) + p(309)*@trend + p(310)*log(n_ts)
'Estimate other coefficients using all the sample
smpl 1996 2030
equation eq3.ls(cov=white) int_hrecv_ts = p(241) + p(242)*(int_hrecv_ts(-1)) + p(243)*r_ba_ts + p(244)*r_ba_ts(-1) + p(245)*b_h_ts + p(246)*b_h_ts(-1) + p(247)*b_h_ts*r_ba_ts + p(248)*b_h_ts(-1)*r_ba_ts(-1)
equation eq4.ls(cov=white) -int_hpaid_ts = p(231) + p(232)*(-int_hpaid_ts(-1)) + p(233)*r_ecb_ts + p(234)*r_ecb_ts(-1) + p(235)*mort_h_ts + p(236)*mort_h_ts(-1) + p(237)*mort_h_ts*r_ecb_ts + p(238)*mort_h_ts(-1)*r_ecb_ts(-1)
equation eq5.ls(cov=white) t_h_ts/wb_ts(-1)=p(9)+p(10)*@trend
equation eq6.ls(cov=white) prop_h_ts/wb_ts(-1)=p(11) + p(12)*@trend
equation eq8.ls(cov=white) cons_h_ts= p(251) + p(252)*cons_h_ts(-1) + p(253)*yd_h_ts(-1)+p(254)*nw_h_ts(-1)
equation eq9.ls(cov=white) house_h_ts = p(255)*house_h_ts(-1) + p(256)*inv_h_ts
equation eq10.ls(cov=white) v_h_ts = p(17)*nfw_h_ts(-1) + p(18)*nfw_h_ts(-1)*r_v_ts(-1) + p(19)*yd_h_ts + p(20)*nfw_h_ts(-1)*r_ba_ts(-1)
equation eq12.ls(cov=white) b_h_ts = p(27)*nfw_h_ts(-1) + p(28)*nfw_h_ts(-1)*r_v_ts(-1) + p(29)*yd_h_ts + p(30)*nfw_h_ts(-1)*r_ba_ts(-1)
equation eq13.ls(cov=white) b_h_ts = p(265)*nfw_h_ts(-1) + p(266)*nfw_h_ts(-1)*r_v_ts(-1) + p(267)*yd_h_ts + p(268)*nfw_h_ts(-1)*r_ba_ts(-1) + p(269)*b_h_ts(-1) + p(270)*@trend + p(271)*@trend^2
equation eq14.ls(cov=white) d_h_ts = p(34)*nfw_h_ts(-1) + p(35)*nfw_h_ts(-1)*r_v_ts + p(36)*yd_h_ts + p(37)*nfw_h_ts(-1)*r_ba_ts(-1)
'Note: ofin_h implicit parameter values (with no trend component) are:
'lambda_h40 = 1-(lambda_h10 + lambda_h20)
'lambda_h41 = -(lambda_h11 + lambda_h21)
'lambda_h42 = -(lambda_h12 + lambda_h22)
'lambda_h43 = -(lambda_h13 + lambda_h23)
equation eq16.ls(cov=white) mort_h_ts = mort_h_ts(-1) + p(38)*yd_h_ts(-1) + p(39)*house_h_ts(-1) + p(40)*inv_h_ts(-1)
equation eq17.ls(cov=white) inv_h_ts = p(41)*inv_h_ts(-1) + p(42)*mort_h_ts(-1) + p(43)*house_h_ts(-1) + p(44)*yd_h_ts(-1) + p(45)*(d(prop_h_ts(-1))/prop_h_ts(-2))
equation eq19.ls(cov=white) (cons_int_ts/y_ts) = p(46)*(cons_int_ts(-1)/y_ts(-1)) +p(47)*y_ts(-1)
equation eq20.ls(cov=white) (1 + (inv_tot_ts - inv_h_ts - k_tot_ts)/k_tot_ts(-1)) = p(48)*(1 + (inv_tot_ts(-1) - inv_h_ts(-1) - k_tot_ts(-1))/k_tot_ts(-2)) + p(49)*d(inv_tot_ts)
equation eq21.ls(cov=white) g_k_ts = p(286) + p(287)*(y_ts/k_tot_ts(-1)) + p(288)*r_lf_ts(-1) + p(289)*pi_f_ts(-1)/k_tot_ts(-1) + p(292)*(r_z_ts(-1))
equation eq22.ls(cov=white) (inv_f_ts/inv_tot_ts) = p(56) + p(57)*(inv_f_ts(-1)/inv_tot_ts(-1)) + p(58)*y_ts(-1) + p(59)*@trend
equation eq24.ls(cov=white) imp_ts = imp_ts(-1)*exp(p(295) + p(296)*log(y_ts/y_ts(-1)) + p(297)*(ner_ts-ner_ts(-1)))
equation eq25.ls(cov=white) export_ts = p(300)*export_ts(-1) + p(301)*d(y_ts/n_ts) + p(302)*d(imp_ts) + p(303)*d(ner_ts)
equation eq26.ls(cov=white) inv_b_ts = p(172) + p(173)*inv_b_ts(-1) + p(174)*@trend + p(175)*r_z_ts(-1) + p(176)*r_v_ts(-1) + p(177)*pi_b_ts(-1)/(nw_b_ts(-1)) + d(p_v_synth)*p(178)
equation eq27.ls(cov=white) b_b_ts = p(188)*nfw_b_ts(-1) + p(189)*nfw_b_ts(-1)*r_v_ts(-1) + p(190)*pi_b_ts + p(191)*nfw_b_ts(-1)*r_ba_ts(-1)
equation eq28.ls(cov=white) v_b_pur_ts = p(192)*nfw_b_ts(-1) + p(193)*nfw_b_ts(-1)*r_v_ts(-1) + p(194)*pi_b_ts + p(195)*nfw_b_ts(-1)*r_ba_ts(-1)
equation eq29.ls(cov=white) l_row_ts = p(205)*l_row_ts(-1) + p(206)*r_ecb_ts(-1) + p(207)*gdp_row_ts(-1) + p(208)*ner_ts(-1) + p(209)*(imp_ts(-1) + export_ts(-1)) + p(210)*(imp_ts(-1) - export_ts(-1))
equation eq30.ls(cov=white) b_row_ts = p(212)*r_z_ts(-1) + p(213)*r_ecb_ts(-1) + p(214)*r_ba_ts(-1) + p(215)*ner_ts(-1) + p(216)*r_v_ts(-1)
equation eq31.ls(cov=white) d_row_ts = p(217)*l_row_ts(-1) + p(218)*gdp_row_ts(-1) + p(219)*(imp_ts(-1) + export_ts(-1)) + p(220)*(imp_ts(-1) - export_ts(-1)) + p(221)*r_ba_ts(-1) + p(222)*gdp_ts(-1)
equation eq32.ls(cov=white) p_y_ts = p(311)*p_y_ts(-1) + p(312)*(y_n_synth-y_ts) + p(313)*wb_ts/y_ts + p(314)*ner_ts
equation eq33.ls(cov=white) p_k_ts = p(315)*p_k_ts(-1) + p(316)*(gdp_ts/k_tot_ts) + p(317)*wb_ts/y_ts + p(318)*ner_ts
equation eq34.ls(cov=white) d(log(y_ts/n_ts)) = p(60)*dummy_prod+p(61)*d(log(inv_f_ts)) + p(62)*d(log(export_ts)) + p(63)*d(log(cons_g_ts)) + dummy_prod*p(64)*d(log(inv_f_ts)) + dummy_prod*p(65)*d(log(cons_g_ts))
equation eq35.ls(cov=white) inv_h_ts = p(332) + p(333)*inv_h_ts(-1) + p(334)*mort_h_ts(-1) + p(335)*p_H_ts(-1)
equation eq36.ls(cov=white) newhouse_d_ts = p(336) + p(337)*d(p_H_ts)
equation eq37.ls(cov=white) p_h_ts = p(338)*(mort_h_ts/yd_h_ts)*yd_h_ts(-1)/house_h_ts
'II) Select starting values for stocks and lagged (endogenous) variables to fit past time series
alpha_h_p = prop_h_ts/wb_ts(-1)
prod_l = y_ts/n_ts
delta_f = inv_f_ts/inv_tot_ts
r_lf = r_lf_ts
r_z = r_z_ts
r_b = r_b_ts
r_h=r_z_ts
c_int = cons_int_ts/gdp_ts
alpha_g_p = prop_g_ts/gdp_ts
alpha_g_fu = funds_g_ts/gdp_ts
theta_tot = net_tau_tot_ts/y_ts
beta_f = gdp_f_ts/gdp_ts
beta_b = gdp_b_ts/gdp_ts
i_f = int_f_ts/(int_f_ts+int_g_ts)
omega_b = wb_b_ts/gdp_ts
nu_kf = 0.09 'Note: 2015 value
beta_h = gdp_h_ts/gdp_ts
omega_tot = wb_ts/gdp_ts
nw_h = nw_h_ts
house_h = house_h_ts
funds_h = funds_h_ts
n = n_ts
cons_h = cons_h_ts
tau_h = tau_h_ts
wb = wb_ts
gdp = gdp_ts
y = y_ts
inv_h = inv_h_ts
int_h = int_h_ts
nl_h = yd_h - cons_h - inv_h + funds_h
d_h = d_h_ts
k_tot = k_tot_ts
d_f = d_f_ts
inv_tot = inv_tot_ts
cons_g = cons_g_ts
export = export_ts
imp = imp_ts
cons_int = cons_int_ts
net_tau_tot = net_tau_tot_ts
y_ad = cons_h + cons_g + inv_tot + export - imp + cons_int - net_tau_tot
inv_f = inv_f_ts
ner = ner_ts
v_f = -v_f_ts
l_f = l_f_ts
prop_h = prop_h_ts
b_g = -b_g_ts
g_k = g_k_ts 'Note: synth data, 1997 value
pi_f = pi_f_ts
inv_g = inv_g_ts
b_h = b_h_ts
b_f = b_f_ts
nw_f = nw_f_ts 'Note: negative sign
b_gf = b_f_ts
int_hpaid = -int_hpaid_ts 'Note: negative sign
int_b = int_b_ts
int_f = -int_f_ts
nw_b = pi_b_ts - inv_b_ts
inv_b = inv_b_ts
d_b = d_h_ts+d_f_ts+d_g_ts+d_row_ts
l_b = mort_h_ts+l_f_ts+l_g_ts+l_row_ts
nw_g = nw_g_ts
nw_b = nw_b_ts
nw_row = nw_row_ts
pi_b = pi_b_ts
d_tot = d_g_ts+d_b_ts
l_tot = d_tot
l_g = l_g_ts
l_row = l_row_ts
r_ecb = r_ecb_ts
r_add = r_lf_ts-r_ecb_ts
nl_f = nl_f_ts
nl_b = nl_b_ts
nl_g = nl_g_ts
nl_row = nl_row_ts
nfw_b = nw_b_ts - (nw_b_ts*nu_kb) + (-d_b_ts)
gdp_row = gdp_row_ts
int_hrecv = int_hrecv_ts
v_h = v_h_ts
v_b = v_b_ts
p_y = p_y_ts
p_k = p_k_ts
debt_g = -nw_g_ts/gdp_ts
ofin_f = ofin_f_ts
y_n = y_n_synth
gdp_h = gdp_h_ts
gdp_b= gdp_b_ts
gdp_g= gdp_g_ts
gdp_row= gdp_row_ts
wb= wb_ts
wb_other= wb_other_ts
funds_f=funds_f_ts
prop_f=prop_f_ts
dti = mort_h_ts/yd_h_ts
house_s = house_s_ts
newhouse_d = newhouse_d_ts
b_b=b_b_ts
v_tot = v_tot_ts
v_fh = v_fh_ts
spread_av = r_ba_ts-r_z_ts
m_av = (r_ba_ts/r_z_ts)-1
mort_h = mort_h_ts
nfw_h = nw_h_ts - house_h_ts + mort_h_ts
yd_h = yd_h_ts
r_ba = r_ba_ts
cg_h = cg_h_ts
cg_f = cg_f_ts
cg_g = cg_g_ts
cg_b = cg_b_ts
p_b = p_b_synth
p_v = p_v_synth
house_h = house_h_ts
p_h = p_h_ts
'Variables to be checked
r_v = @mean(r_v_ts, "1997 1997")
gdp = @mean(gdp_ts, "1997 1997")
omega_s = @mean((wb_h_p_ts/wb_ts), "1997 1997")
'III) Reasonable values for remaining parameters
gbills = 0 'Starting value of nominal supply of government bills (convention)
r_d = 0 'Interest rate on bank deposits and cash (convention)
parag = 0 'Autonomous government consumption or fiscal policy shock (0 in baseline scenario)
xi_f = 0.7 'Percentage of NPBL which become NFC loan write offs (inferred from available data)
psi = 0.01 'Percentage of investment funded by new shares - Note: Burgess et al. 2016 use 0.1 for UK!
v_f_r = -v_f 'Real volume of NFC equity, so that p_v = 1 (convention) - Note: v_f < 0
p_v = v_f_r/-v_f 'Price (index) of NFC shares
b_g_r = b_g 'Real volume of government bonds, so that p_b = 1 (convention)
p_b = b_g/b_g_r 'Price (index) of Government bonds
p_H = 40 'Initial value of housing (based on available data)
g_H = 0.03 'Growth rate of housing
cg_h = 0 'Initial value for housing CG
perc_cg_h = -0.45 'Percentage of household capital gains or losses on other financial assets (average over period 1996-2016)
'--------------------------------------------------------------------------------------------------------------------------------------------------
'Create the model (named 'ItalySFC')
model ItalySFC
'Set up system of difference equations
' ****************************************************************************