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Is GDP specified correctly in SS.py algorithm? #972
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@rickecon I think the theory and the code are correct in the calculation of real GDP. The numeraire good is the good from industry |
And I'll add: Industry These assumptions can and should be relaxed, but they are relevant you think about the goods market clearing condition. Note that the price of the composite good, |
@jdebacker. In the code, we use the following expression for nominal GDP, in which However, in the documentation, we represent nominal GDP as being multiplied by the composite goods price. I think I see the issue. It is just wrong in the documentation in equations (64) and (134). However, this also implies that the expressions for all the variables as a percent of GDP are incorrect, because those are also multiplied by |
@rickecon I agree with that -- I think the code is appropriate, but it does differ from the docs in that in the docs we defined "nominal" (I think it should be "real", since it's just putting GDP in terms of the numeraire good) GDP as |
Ah. I see now. It is just in the documentation. Even in the documentation we specify the government spending, transfers, and infrastructure investment as percentages of GDP multiplied by the composite goods price, but it is correct in the code (just |
I updated all the instances of |
In the theory and documentation for OG-Core, we define nominal GDP in equation 64 and 134 as:
However, in line 366 of$\bar{Y}$ excludes the composite goods price $\bar{p}$ .
SS.py
and in the steady-state equilibrium documentation of the algorithm (step 2.17), the update of the value ofThese two expressions are equivalent when$M=1$ because the one industry is the numeraire, so $p=1$ . But the two expressions are not equivalent when the number of industries is greater than 1 ($M\geq 2$ ). The equation should be the following.
I have fixed this in open PR #971. @jdebacker
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