Bridging the Gap between Economic Modelling and Simulation: A Simple Dynamic Aggregate Demand-Aggregate Supply Model with Matlab

Box 2

Policy and technology shocks.

a0 = 41

a1 = 4

a2 = 0.2

New parameter values: c0 = 10; i_0 = 5; G = 5.5; b = 0.8; k = 0.05; d = 0.05;

h = 0.1; tau = 0.25; alpha = 0.1; beta = 1; mdot = 0.01; yn = 1;

New initial conditions: y0 = 2.07998; pie0 = 0.0100036

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New Steady-State:

Steady-state real ouputSteady state expectedinflation

1.0000000.010000

Steady state actual inflation

0.0100