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Government Experimental Logic - 'Deficit to GDP' Treasury View

Dan O'Driscoll
Developer

ABMLP-X Experimental 'Deficit to GDP' Treasury View logic: March 2024. Pure government expenditures in a run to the future may depend on either Government agent logic or historical analysis of expenditures.

Model Government Endogenous Expenditures​

G&L pp 160-165: Making Government Expenditures Endogenous

"A key feature of all the models presented up to now is that pure government expenditures are assumed to be exogenous.. Still, there is no reason to believe that pure government expenditures are impervious to what is going on in the rest of the economy. ..What we want to underline in the present context is the sensitivity of pure government expenditures to the budget position of the government. The advocates of the Treasury view argue that governments ought to reduce their expenditures and the fiscal deficit in a slowdown because by doing so, the government would provide room for the private sector to collect the funds and the savings necessary for its investment expenditures - so that it does not crowd-out the private sector."

government-endogenous-expenditure.py
"""
'Deficit to GDP': Experimental logic.
"""
_psbr_national_income_ratio = zero_division(self.fiscal_balance, Decimal(getNatIncome()))
_βg = Decimal(0.05) # A fraction (5%) of the deficit incurred in the previous period.
_existential_threat = False
_psbr_increase = Decimal(0.5) if _existential_threat else Decimal(0)
_add2 = self.fiscal_balance * _psbr_increase # Random change in government expenditures.

if _psbr_national_income_ratio > Decimal(0.03): # +3%
    self.pure_expenditure = self.pure_expenditure - ((_βg * self.fiscal_balance) + _add2)
elif _psbr_national_income_ratio < Decimal(-0.03): # -3%
    self.pure_expenditure = self.pure_expenditure + ((_βg * self.fiscal_balance) + _add2)
else:
    self.pure_expenditure = self.pure_expenditure

Model Run Parameters​

A model run free from interest payments on Government money.

  • Model: ABMLP-X
  • Model Run: Test
  • Government Expenditure: See Charts
  • Number of Producers: 1
  • Number of Households: 1
  • Taxation rate: 20% (Flat rate; all household agents)
  • Coupon Rate: 0%
  • Interest Rate: 0%

Charts​

  1. Government Expenditure: 20 units every step. View a steady state system test run.
  2. Government Expenditure: Experimental Treasury View Logic Starting with 20 Units. The Exogenous variable self.pure_expenditure becomes an endogenous variable. The system is now path-dependent; time-dependent between what happens in the transitional states. View a steady state system test run.