Scenarios GL06LP3#

The following scenarios are available by default for the GL06LP3 model.

Baseline#

The baseline scenario has the following exogenous values:

  • Initial government demand \(G = 20\) (becomes endogenous via fiscal rule)

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

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

Government spending is endogenous in LP3, governed by a fiscal austerity rule. When the deficit-to-GDP ratio exceeds a threshold, the government cuts spending.

Scenario 1: Drop in alpha1#

The propensity to consume out of income drops by 0.1, triggering a recession and fiscal austerity response.

Scenario 2: Rise in Bill Rate#

The interest rate on bills increases from 0.03 to 0.04, with both bond prices and government spending adjusting endogenously.