Scenarios GL06LP2#

The following scenarios are available by default for the GL06LP2 model.

Baseline#

The baseline scenario has the following exogenous values:

  • Government demand \(G = 20\)

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

  • Initial bond price \(p_{bl}^{\text{init}} = 20\)

Bond prices are endogenous, determined by the target-proportion mechanism.

Scenario 1: Rise in Bill Rate#

The interest rate on bills increases from 0.03 to 0.04. The bond price responds endogenously through the target-proportion mechanism.

Scenario 2: Expected Bond Price Fall#

Households’ expected bond price is shocked downwards by 1 unit. This shifts portfolio demand away from bonds towards bills and cash.