Parameters
. | Value
. | Description
. |
---|---|---|

$\xi J,J=TH,N$ | 1 | Capital–labor elasticity of substitution for domestic tradables and nontradables production; default value in GIMF |

$\xi A$ | 0.5 | Tradable–nontradable elasticity of substitution; default value in GIMF |

$\eta $ | 0.5 | Share of LIQ households; set relatively high as typical in emerging markets and low-income countries |

$\alpha G1$ | 0.1 | Elasticity of output to public capital; more conservative than Bom and Ligthart's (2014) estimate of all public capital (0.122) and core infrastructure capital (0.17), which was used in IMF (2014) |

$\delta G1$ | 0.04 | Depreciation rate of public capital; default value in GIMF |

$\beta 1$ | Endogenously derived as $\beta 1=-\beta 2Blimit-B\xafGDP\xaf\beta 3$ so that $log(1+premiumt)=0$ at steady state | |

$\beta 2$ | −0.0003 | Slope of sovereign debt premium function; lower than Peiris (2015) estimate of 0.0005–0.0006 to account for recent improvements in fiscal management |

$\beta 3$ | −1 | Curvature of sovereign debt premium function; −1 implies linearity |

$Blimit$ | 80 | Upper limit for public debt-to-GDP ratio; higher than historical maximum |

$bss\xaf$ | 45 | Steady-state public debt-to-GDP ratio |

$gss\xaf$ | −2 | Steady-state overall fiscal balance-to-GDP ratio |

Parameters
. | Value
. | Description
. |
---|---|---|

$\xi J,J=TH,N$ | 1 | Capital–labor elasticity of substitution for domestic tradables and nontradables production; default value in GIMF |

$\xi A$ | 0.5 | Tradable–nontradable elasticity of substitution; default value in GIMF |

$\eta $ | 0.5 | Share of LIQ households; set relatively high as typical in emerging markets and low-income countries |

$\alpha G1$ | 0.1 | Elasticity of output to public capital; more conservative than Bom and Ligthart's (2014) estimate of all public capital (0.122) and core infrastructure capital (0.17), which was used in IMF (2014) |

$\delta G1$ | 0.04 | Depreciation rate of public capital; default value in GIMF |

$\beta 1$ | Endogenously derived as $\beta 1=-\beta 2Blimit-B\xafGDP\xaf\beta 3$ so that $log(1+premiumt)=0$ at steady state | |

$\beta 2$ | −0.0003 | Slope of sovereign debt premium function; lower than Peiris (2015) estimate of 0.0005–0.0006 to account for recent improvements in fiscal management |

$\beta 3$ | −1 | Curvature of sovereign debt premium function; −1 implies linearity |

$Blimit$ | 80 | Upper limit for public debt-to-GDP ratio; higher than historical maximum |

$bss\xaf$ | 45 | Steady-state public debt-to-GDP ratio |

$gss\xaf$ | −2 | Steady-state overall fiscal balance-to-GDP ratio |

GDP = gross domestic product, GIMF = Global Integrated Monetary and Fiscal, IMF = International Monetary Fund, LIQ = liquidity constrained.

Sources: Kumhof, Michael, Douglas Laxton, Dirk Muir, and Susanna Mursula. 2010. “The Global Integrated Monetary and Fiscal Model (GIMF)—Theoretical Structure.” IMF Working Paper No. 10/34; International Monetary Fund. 2014. *World Economic Outlook, October 2014,* Chapter 3. Washington, DC; and author's calculations.

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