Scenarios GL06LP#

The following scenarios are available by default for the GL06LP model.

Baseline#

The baseline scenario has the following exogenous values:

  • Government demand \(G = 20\)

  • Interest rate on bills \(r_b = 0.03\)

  • Bond price \(p_{bl} = 20\)

Scenario 1: Rise in Interest Rates (Section 5.7)#

A combined increase in both short-term and long-term interest rates. The bill rate rises from 3% to 4%, while the bond price drops from 20 to 15 (the bond yield rises from 5% to 6.67%). This is the experiment discussed in Section 5.7 of Godley & Lavoie (2006), corresponding to Figures 5.2–5.4.

Scenario 2: Drop in alpha1 (Section 5.9)#

The propensity to consume out of current income (\(\alpha_1\)) drops by 0.1. This provides the LP baseline for the hysteresis comparison with Model LP3 (Figure 5.10 vs Figure 5.11).