## Wednesday, November 25, 2015

### DSGE form of the IT model (active but not interactive)

Well, the original idea of this post was to have an interactive version of the DSGE form of the IT model:

Oh, well. Here is the original source for the graph -- it's showing the effect of a monetary expansion (m, yellow) on output (n, blue), inflation (π, green) and interest rates (r, red) depending on the value of the information transfer (IT) index. This is short run (DSGE form is log-linearized, so is only true over a few time steps).

1. I made an interactive version of one of Nick Edmond's models once... using a free online version of Excel. It made plots interactively as well. I learned that Excel was not really the best tool (I had to "code" up my own version of multidimensional Newton iterations in it... a huge pain in the butt). I had to limit the number of iterations ahead of time too. But it worked in a blogspot blog! Nick wasn't very intrigued... Lol... (wise man!)

1. I'm still on the lookout for a good way to make things interactive, so I'll look into it.

2. Have you seen this interactive page?

I emailed the author a few years back. I forgot what he uses. It's not Excel (I made something similar in Excel, but it's not nearly as good). I don't know if it does line plots.

Also, Vincent Cate has something that does make line plots if I recall correctly (but I can't find it now).

3. Also, now I recall that I used Excel for Nick's model because that's what he's used to. He sent me the file.

4. That page uses javascript and svgweb

5. Oh, OK. Here's Vincent's model (I haven't looked at it for some time):
http://howfiatdies.blogspot.com/2013/03/simulating-hyperinflation.html?m=1

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7. BTW, is the IT index in the plot abovee your "k" or your "kappa"... wasn't "kappa" your original symbols (ranging roughly from 0.5 (China) to 1 (Japan)), and k = 1/kappa?

It looks like "k" on the plot, but I thought the information transfer index (IT index) was originally kappa.

By the behavior of the curves, it looks like it really is k you're displaying, and it really is true that k = 1/kappa, but then I'm confused: if k is the IT index, what do you call kappa?

8. I've tried to be consistent with saying k for "1/kappa", but in truth it shouldn't matter what you label a parameter. There's no specific reason to have

dD/dS = (1/kappa) (D/S)

versus

dD/dS = k (D/S)

... and the latter is easier to write most of the time.