Download Model Saudi Arabia 96/2 Source: K. Al

Model Saudi Arabia 96/2
Source:
K. Al-Meshal, A rational expectations macroeconomic model of the
Saudi Arabian economy, Dept. of Economics and Accounting, The
University of Liverpool, UK, 1996, 140-146
The Model Listing: Behavioral equations
Real money (M1)
(1) ∆ log m
= a1,1 + a1,2 ∆ RS + a1,3 RSt-1 + a1,4 log Yt-1 + a1,5 log m -1
Private sector non-durable consumption
(2) ∆ log CONS = a2,1 + a2,2 ∆ log W + a2,3 ∆ QEXP + a2,4 log W-1 + a2,5 log CONSt-1
Government expenditure
(3) ∆ log g
= a3,1 + a3,2 rrl + a3,3 log W + a3,4 QEXP + a3,5 log g t-1
Current balance
(4) ∆ NONXVOL = a4,1 + a4,2 RXR + a4,3 WT + a4,4 Y + a4,5 NONXVOLt-1
Real crude oil exports
(5) ∆ log OILEX = a5,1 + a5,2 ∆ log ( OILP ) + a5,3 WTt-1 + a5,4 log YNt-1
PUS
Real exchange rates
(6) ∆ log RXR = a6,1 + a6,2 ∆ log ( YN ) + a6,3 RAZIt-1 + a6,4 RXRt-1
YN*
Real wages ( (1985 prices)
(7) ∆ log RAZI = a7,1 + a7,2 log Y* + a7,3 log TLAB + a7,3 UNEINF + a7,4 log RAZIt-1
Domestic oil consumption
(8) ∆ log OILCON = a8,1 + a8,2 log Y + a8,3 log OILCONt-1
The Model Listing: Identities and technical relations
(9) rrs
= USRRS – EGRXRt+1
Real short run interest rates
(10) RS
= rrs + EINFt+1
Nominal short run interest rates
(11) rrl
= USRRL – EGRXRL
Real long run interest rates
(12) RL
= rrl + EINFL
Nominal long run interest rates
(13) Y
= CONS + EG + ∆ g + a13,1 gt-1 + XVOL Output identity (GDP)
(14) YO
= OILEX + OILCON
Total oil production
(15) YN
= Y – YO
Total non-oil production
(16) XVOL = NONXVOL + OILEX
Current account (total exports)
(17) ROIL = OILEX
Oil Revenues
(18) W
=θ+g
Private sector wealth
(19) θ
=m+b
Private sector financial assets
(20) INF
= ∆RXR + ∆ log PUS – ∆ log S
Inflation rate
(21) P
= Pt-1 · (1 + INF)
Price level
(22) PUS
= PUSt-1 · (1 + USINF)
Foreign price level
(23) PSBR = eg – ROIL – OTHR + RDI
Public sector borrowing requirements
(24) OTHR = t · Y
Other non-oil revenues
(25) RDI
= b · R + bf · Rf
Real debt interest
(26) ∆θ
= PSBR + XVAL – DEVAL
(27) DEVAL = mt-1 · INF + b t-1 · (INF + ∆R)
Change of private sector financial assets
Private financial assets devaluation
General notation
∆ = Difference operator, log = Natural logarithm
Endogenous and exogenous variables
b
Government bonds
bf
Foreign debt
CONS
Private sector non-durable consumption (1985 prices)
d
Depreciation rate
DEVAL Private financial assets devaluation
DOMOILP Domestic price of oil
eg
Government expenditure
g
Private sector stock of physical assets (1985 prices)
INF
Domestic inflation
m
Real money (M1) (1985 prices)
NONXVOL Non-oil current account
OILCON Domestic oil consumption
OILEX
Real crude oil exports (1985 prices)
OILP
Oil price index (1985=100)
OILR
Real oil revenues (1985 prices)
OTHR
Other non-oil revenues
P
Domestic price level (1985=100)
PSBR
Public sector borrowing requirements
Q
Deviation of output from trend = log (Y/Y*)
QEXP
Expected log (Y/Y*)
RAZI
Real wages (1985 prices)
RDI
Real debt interest
RL, rrl
Nominal and real long-run interest rates
ROILM Moving average of oil revenues
RS, rrs
Nominal and real short-run interest rates
RXR
Real exchange rates
S
Nominal exchange rate
θ
Private sector financial assets (1985 prices)
USINF
Foreign (US) Inflation (1985 prices)
USP
Foreign (US) consumer price index (1985=100)
USRRS
Real short-run foreign interest rates proxied by US ones
USRRL
Real long-run foreign interest rates proxied by US ones
W
Private sector total wealth (1985 prices)
WT
World trade (1985=100)
XVAL
Current account including terms of trade effects
XVOL
Current account excluding terms of trade effects
Y
Gross Domestic Product (1985 prices)
YN
Non-oil GDP
YO
Total oil production
Y*
GDP trend
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous
exogenous