Modeling foreign direct aid

docs/book/content/theory/government.md

@@ -615,11 +615,11 @@ Note that the budget closure rule (described in Section ref{`SecUnbalGBCcloseRul
 (SecUnbalGBCbudgConstr)=
 ## Government Budget Constraint
 
-  Let the level of government debt in period $t$ be given by $D_t$. The government budget constraint requires that government revenue $Rev_t$ plus the budget deficit ($D_{t+1} - D_t$) equal expenditures on interest on the debt, government spending on public goods $G_t$, total infrastructure investments $I_{g,t}$, total pension outlays, total transfer payments to households $TR_t$, and $UBI_t$ every period $t$,
+  Let the level of government debt in period $t$ be given by $D_t$. The government budget constraint requires that government revenue $Rev_t$, external foreign assistance, $FA_t$, plus the budget deficit ($D_{t+1} - D_t$) equal expenditures on interest on the debt, government spending on public goods $G_t$, total infrastructure investments $I_{g,t}$, total pension outlays, total transfer payments to households $TR_t$, and $UBI_t$ every period $t$,
 
   ```{math}
   :label: EqUnbalGBCbudgConstr
-    D_{t+1} + Rev_t = (1 + r_{gov,t})D_t + G_t + I_{g,t} + Pensions_t + TR_t + UBI_t  \quad\forall t
+    D_{t+1} + Rev_t + FA_t = (1 + r_{gov,t})D_t + G_t + I_{g,t} + Pensions_t + TR_t + UBI_t  \quad\forall t
   ```
 
   where $r_{gov,t}$ is the interest rate paid by the government defined in equation {eq}`EqUnbalGBC_rate_wedge` below, $G_{t}$ is government spending on public goods, $I_{g,t}$ is total government spending on infrastructure investment, $TR_{t}$ are non-pension government transfers, and $UBI_t$ is the total UBI transfer outlays across households in time $t$. All variables in {eq}`EqUnbalGBCbudgConstr` are real variables denominated in units of current-period output in industry $M$ the numeraire ($p_{M,t}=1$ for all $t$).
@@ -713,8 +713,8 @@ Note that the budget closure rule (described in Section ref{`SecUnbalGBCcloseRul
     &\text{where}\quad g_{g,t} =
       \begin{cases}
         1 \qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\quad\:\text{if}\quad t < T_{G1} \\
-        \frac{\left[\rho_{d}\alpha_{D}Y_{t} + (1-\rho_{d})D_{t}\right] - (1+r_{gov,t})D_{t} - I_{g,t} - TR_{t} - UBI_{t} + Rev_{t}}{\alpha_g Y_t} \quad\text{if}\quad T_{G1}\leq t<T_{G2} \\
-        \frac{\alpha_{D}Y_{t} - (1+r_{gov,t})D_{t} - I_{g,t} - TR_{t} - UBI_{t} + Rev_{t}}{\alpha_g Y_t} \qquad\qquad\quad\:\:\,\text{if}\quad t \geq T_{G2}
+        \frac{\left[\rho_{d}\alpha_{D}Y_{t} + (1-\rho_{d})D_{t}\right] - (1+r_{gov,t})D_{t} - I_{g,t} - TR_{t} - UBI_{t} + Rev_{t} + FA_{t}}{\alpha_g Y_t} \quad\text{if}\quad T_{G1}\leq t<T_{G2} \\
+        \frac{\alpha_{D}Y_{t} - (1+r_{gov,t})D_{t} - I_{g,t} - TR_{t} - UBI_{t} + Rev_{t} + FA_{t}}{\alpha_g Y_t} \qquad\qquad\quad\:\:\,\text{if}\quad t \geq T_{G2}
       \end{cases} \\
     &\text{and}\quad g_{tr,t} = 1 \quad\forall t
   \end{split}
@@ -735,8 +735,8 @@ Note that the budget closure rule (described in Section ref{`SecUnbalGBCcloseRul
     &\text{where}\quad g_{tr,t} =
       \begin{cases}
         1 \qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\:\:\:\,\text{if}\quad t < T_{G1} \\
-        \frac{\left[\rho_{d}\alpha_{D}Y_{t} + (1-\rho_{d})D_{t}\right] - (1+r_{gov,t})D_{t} - G_{t} - I_{g,t} -  UBI_{t} + Rev_{t}}{\alpha_{tr} Y_t} \quad\text{if}\quad T_{G1}\leq t<T_{G2} \\
-        \frac{\alpha_{D}Y_{t} - (1+r_{gov,t})D_{t} - G_{t} - I_{g,t} - UBI_{t} + Rev_{t}}{\alpha_{tr}Y_t} \qquad\qquad\quad\:\:\:\text{if}\quad t \geq T_{G2}
+        \frac{\left[\rho_{d}\alpha_{D}Y_{t} + (1-\rho_{d})D_{t}\right] - (1+r_{gov,t})D_{t} - G_{t} - I_{g,t} -  UBI_{t} + Rev_{t} + FA_{t}}{\alpha_{tr} Y_t} \quad\text{if}\quad T_{G1}\leq t<T_{G2} \\
+        \frac{\alpha_{D}Y_{t} - (1+r_{gov,t})D_{t} - G_{t} - I_{g,t} - UBI_{t} + Rev_{t} + FA_{t}}{\alpha_{tr}Y_t} \qquad\qquad\quad\:\:\:\text{if}\quad t \geq T_{G2}
       \end{cases} \\
     &\text{and}\quad g_{g,t} = 1 \quad\forall t
   \end{split}
@@ -766,8 +766,8 @@ Note that the budget closure rule (described in Section ref{`SecUnbalGBCcloseRul
     &\text{where}\quad g_{trg,t} =
     \begin{cases}
       1 \qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\quad\:\,\text{if}\quad t < T_{G1} \\
-      \frac{\left[\rho_{d}\alpha_{D}Y_{t} + (1-\rho_{d})D_{t}\right] - (1+r_{gov,t})D_{t} - I_{g,t} - UBI_{t} + Rev_{t}}{\left(\alpha_g + \alpha_{tr}\right)Y_t} \quad\text{if}\quad T_{G1}\leq t<T_{G2} \\
-      \frac{\alpha_{D}Y_{t} - (1+r_{gov,t})D_{t} - I_{g,t} - UBI_{t} + Rev_{t}}{\left(\alpha_g + \alpha_{tr}\right)Y_t} \qquad\qquad\quad\:\:\:\text{if}\quad t \geq T_{G2}
+      \frac{\left[\rho_{d}\alpha_{D}Y_{t} + (1-\rho_{d})D_{t}\right] - (1+r_{gov,t})D_{t} - I_{g,t} - UBI_{t} + Rev_{t} + FA_{t}}{\left(\alpha_g + \alpha_{tr}\right)Y_t} \quad\text{if}\quad T_{G1}\leq t<T_{G2} \\
+      \frac{\alpha_{D}Y_{t} - (1+r_{gov,t})D_{t} - I_{g,t} - UBI_{t} + Rev_{t} + FA_{t}}{\left(\alpha_g + \alpha_{tr}\right)Y_t} \qquad\qquad\quad\:\:\:\text{if}\quad t \geq T_{G2}
     \end{cases}
   \end{split}
   ```

docs/book/content/theory/stationarization.md

@@ -244,7 +244,7 @@ The usual definition of equilibrium would be allocations and prices such that ho
 
   ```{math}
   :label: EqStnrzGovBC
-    e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\hat{D}_{t+1} + \hat{Rev}_t = (1 + r_{gov,t})\hat{D}_t + \hat{G}_t + \hat{I}_{g,t} + \hat{Pensions}_t + \hat{TR}_t + \hat{UBI}_t \quad\forall t
+    e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\hat{D}_{t+1} + \hat{Rev}_t + \hat{FA}_t = (1 + r_{gov,t})\hat{D}_t + \hat{G}_t + \hat{I}_{g,t} + \hat{Pensions}_t + \hat{TR}_t + \hat{UBI}_t \quad\forall t
   ```
 
   The stationarized versions of the rule for total government infrastructure investment spending $I_{g,t}$ in {eq}`EqUnbalGBC_Igt` and the rule for government investment spending in each industry in {eq}`EqUnbalGBC_Igt` are found by dividing both sides of the respective equations by $e^{g_y t}\tilde{N}_t$.
@@ -298,8 +298,8 @@ The usual definition of equilibrium would be allocations and prices such that ho
     &\text{where}\quad g_{g,t} =
     \begin{cases}
       1 \qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\quad\text{if}\quad t < T_{G1} \\
-      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\left[\rho_{d}\alpha_{D}\hat{Y}_{t} + (1-\rho_{d})\hat{D}_{t}\right] - (1+r_{gov,t})\hat{D}_{t} - \hat{TR}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t}}{\alpha_g \hat{Y}_t} \:\text{if}\: T_{G1}\leq t<T_{G2} \\
-      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\alpha_{D}\hat{Y}_{t} - (1+r_{gov,t})\hat{D}_{t} - \hat{TR}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t}}{\alpha_g \hat{Y}_t} \qquad\qquad\quad\,\text{if}\quad t \geq T_{G2}
+      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\left[\rho_{d}\alpha_{D}\hat{Y}_{t} + (1-\rho_{d})\hat{D}_{t}\right] - (1+r_{gov,t})\hat{D}_{t} - \hat{TR}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t} + \hat{FA}_t}{\alpha_g \hat{Y}_t} \:\text{if}\: T_{G1}\leq t<T_{G2} \\
+      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\alpha_{D}\hat{Y}_{t} - (1+r_{gov,t})\hat{D}_{t} - \hat{TR}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t} + \hat{FA}_t}{\alpha_g \hat{Y}_t} \qquad\qquad\quad\,\text{if}\quad t \geq T_{G2}
     \end{cases} \\
     &\text{and}\quad g_{tr,t} = 1 \quad\forall t
   \end{split}
@@ -313,8 +313,8 @@ The usual definition of equilibrium would be allocations and prices such that ho
     &\text{where}\quad g_{tr,t} =
     \begin{cases}
       1 \qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\:\:\:\text{if}\quad t < T_{G1} \\
-      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\left[\rho_{d}\alpha_{D}\hat{Y}_{t} + (1-\rho_{d})\hat{D}_{t}\right] - (1+r_{gov,t})\hat{D}_{t} - \hat{G}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t}}{\alpha_{tr} \hat{Y}_t} \:\text{if}\: T_{G1}\leq t<T_{G2} \\
-      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\alpha_{D}\hat{Y}_{t} - (1+r_{gov,t})\hat{D}_{t} - \hat{G}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t}}{\alpha_{tr} \hat{Y}_t} \qquad\qquad\quad\,\text{if}\quad t \geq T_{G2}
+      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\left[\rho_{d}\alpha_{D}\hat{Y}_{t} + (1-\rho_{d})\hat{D}_{t}\right] - (1+r_{gov,t})\hat{D}_{t} - \hat{G}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t} + \hat{FA}_t}{\alpha_{tr} \hat{Y}_t} \:\text{if}\: T_{G1}\leq t<T_{G2} \\
+      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\alpha_{D}\hat{Y}_{t} - (1+r_{gov,t})\hat{D}_{t} - \hat{G}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t} + \hat{FA}_t}{\alpha_{tr} \hat{Y}_t} \qquad\qquad\quad\,\text{if}\quad t \geq T_{G2}
     \end{cases} \\
     &\text{and}\quad g_{g,t} = 1 \quad\forall t
   \end{split}
@@ -328,8 +328,8 @@ The usual definition of equilibrium would be allocations and prices such that ho
     &\text{where}\quad g_{trg,t} =
     \begin{cases}
       1 \qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\qquad\:\quad \text{if}\quad t < T_{G1} \\
-      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\left[\rho_{d}\alpha_{D}\hat{Y}_{t} + (1-\rho_{d})\hat{D}_{t}\right] - (1+r_{gov,t})\hat{D}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t}}{\left(\alpha_g + \alpha_{tr}\right)\hat{Y}_t} \:\text{if}\: T_{G1}\leq t<T_{G2} \\
-      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\alpha_{D}\hat{Y}_{t} - (1+r_{gov,t})\hat{D}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t}}{\left(\alpha_g + \alpha_{tr}\right)\hat{Y}_t} \qquad\qquad\quad\,\text{if}\quad t \geq T_{G2}
+      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\left[\rho_{d}\alpha_{D}\hat{Y}_{t} + (1-\rho_{d})\hat{D}_{t}\right] - (1+r_{gov,t})\hat{D}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t} + \hat{FA}_t}{\left(\alpha_g + \alpha_{tr}\right)\hat{Y}_t} \:\text{if}\: T_{G1}\leq t<T_{G2} \\
+      \frac{e^{g_y}\left(1 + \tilde{g}_{n,t+1}\right)\alpha_{D}\hat{Y}_{t} - (1+r_{gov,t})\hat{D}_{t} - \hat{I}_{g,t} - \hat{UBI}_t + \hat{Rev}_{t} + \hat{FA}_t}{\left(\alpha_g + \alpha_{tr}\right)\hat{Y}_t} \qquad\qquad\quad\,\text{if}\quad t \geq T_{G2}
     \end{cases}
   \end{split}
   ```

ogcore/SS.py

@@ -1115,7 +1115,8 @@ def SS_solver(
     net_capital_outflows_vec[-1] = net_capital_outflows
     RM_vec_ss = np.zeros(p.M)
     RM_vec_ss[-1] = RM_ss
-
+    foreign_aid_vec_ss = np.zeros(p.M)
+    foreign_aid_vec_ss[-1] = p.alpha_FA[-1] * Yss
     RC = aggr.resource_constraint(
         Y_vec_ss,
         C_m_vec_ss,
@@ -1124,6 +1125,7 @@ def SS_solver(
         I_g_vec_ss,
         net_capital_outflows_vec,
         RM_vec_ss,
+        foreign_aid_vec_ss,
     )
     logger.info(f"Foreign debt holdings = {D_f_ss}")
     logger.info(f"Foreign capital holdings = {K_f_ss}")

ogcore/TPI.py

@@ -1393,6 +1393,8 @@ def run_TPI(p, client=None):
     net_capital_outflows_vec[:, -1] = net_capital_outflows[: p.T]
     RM_vec = np.zeros((p.T, p.M))
     RM_vec[:, -1] = RM[: p.T]
+    foreign_aid_vec = np.zeros((p.T, p.M))
+    foreign_aid_vec[:, -1] = p.alpha_FA[: p.T] * Y[: p.T]
     RC_error = aggr.resource_constraint(
         Y_vec,
         C_m_vec,
@@ -1401,6 +1403,7 @@ def run_TPI(p, client=None):
         I_g_vec,
         net_capital_outflows_vec,
         RM_vec,
+        foreign_aid_vec,
     )
     # Compute total investment (not just domestic)
     I_total = aggr.get_I(None, K[1 : p.T + 1], K[: p.T], p, "total_tpi")

ogcore/aggregates.py

@@ -509,7 +509,7 @@ def get_r_p(r, r_gov, p_m, K_vec, K_g, D, MPKg_vec, p, method):
     return np.squeeze(r_p)
 
 
-def resource_constraint(Y, C, G, I_d, I_g, net_capital_flows, RM):
+def resource_constraint(Y, C, G, I_d, I_g, net_capital_flows, RM, foreign_aid):
     r"""
     Compute the error in the resource constraint.
 
@@ -518,7 +518,8 @@ def resource_constraint(Y, C, G, I_d, I_g, net_capital_flows, RM):
         \text{rc_error} &= \hat{Y}_t - \hat{C}_t -
       \Bigl(e^{g_y}\bigl[1 + \tilde{g}_{n,t+1}\bigr]\hat{K}^d_{t+1} -
       \hat{K}^d_t\Bigr) - \delta\hat{K}_t - \hat{G}_t - \hat{I}_{g,t} ... \\
-        &\qquad -\: \hat{\text{net capital outflows}}_t + \hat{RM}_t
+        &\qquad -\: \hat{\text{net capital outflows}}_t + \hat{RM}_t +
+        \hat{\text{foreign aid}}_t
       \end{split}
 
     Args:
@@ -529,12 +530,13 @@ def resource_constraint(Y, C, G, I_d, I_g, net_capital_flows, RM):
         I_g (array_like): investment in government capital
         net_capital_flows (array_like): net capital outflows
         RM (array_like): aggregate remittances
+        foreign_aid (array_like): foreign aid payments
 
     Returns:
         rc_error (array_like): error in the resource constraint
 
     """
-    rc_error = Y - C - I_d - I_g - G - net_capital_flows + RM
+    rc_error = Y - C - I_d - I_g - G - net_capital_flows + RM + foreign_aid
 
     return rc_error
 

ogcore/default_parameters.json

@@ -954,6 +954,30 @@
             }
         }
     },
+    "alpha_FA": {
+        "title": "Foreign aid payments to domestic government as a share of GDP",
+        "description": "Foreign aid payments to domestic government as a share of GDP.",
+        "short_description": "Foreign aid as a share of GDP",
+        "param_notation": "$\\alpha_{FA}$",
+        "section_1": "Fiscal Policy Parameters",
+        "section_2": "Fiscal Policy Parameters",
+        "notes": "",
+        "number_dims": 1,
+        "type": "float",
+        "value": [
+            {
+                "value": [
+                    0.0
+                ]
+            }
+        ],
+        "validators": {
+            "range": {
+                "min": 0.0,
+                "max": 1.0
+            }
+        }
+    },
     "alpha_RM_1": {
         "title": "Exogenous ratio of aggregate remittances to GDP in current period (t=1)",
         "description": "Exogenous ratio of aggregate remittances to GDP in current period (t=1).",

ogcore/fiscal.py

@@ -94,6 +94,9 @@ def D_G_path(r, dg_fixed_values, p):
     else:
         G = p.alpha_G[: p.T] * Y[: p.T]
 
+    # direct foreign aid
+    foreign_aid = p.alpha_FA[: p.T] * Y[: p.T]
+
     if p.budget_balance:
         D = np.zeros(p.T + 1)
         G = p.alpha_G[: p.T] * Y[: p.T]
@@ -116,6 +119,7 @@ def D_G_path(r, dg_fixed_values, p):
                 + UBI_outlays[t - 1]
                 + agg_pension_outlays[t - 1]
                 - total_tax_revenue[t - 1]
+                - foreign_aid[t - 1]
             )
             r_gov[t] = get_r_gov(r[t], D[t] / Y[t], p, method="scalar", t=t)
             if (t >= p.tG1) and (t < p.tG2):
@@ -124,6 +128,7 @@ def D_G_path(r, dg_fixed_values, p):
                     * (p.rho_G * p.debt_ratio_ss * Y[t] + (1 - p.rho_G) * D[t])
                     - (1 + r_gov[t]) * D[t]
                     + total_tax_revenue[t]
+                    + foreign_aid[t]
                     - agg_pension_outlays[t]
                     - I_g[t - 1]
                     - TR[t]
@@ -134,6 +139,7 @@ def D_G_path(r, dg_fixed_values, p):
                     growth[t + 1] * (p.debt_ratio_ss * Y[t])
                     - (1 + r_gov[t]) * D[t]
                     + total_tax_revenue[t]
+                    + foreign_aid[t]
                     - agg_pension_outlays[t]
                     - I_g[t - 1]
                     - TR[t]
@@ -152,12 +158,14 @@ def D_G_path(r, dg_fixed_values, p):
             + UBI_outlays[t - 1]
             + agg_pension_outlays[t - 1]
             - total_tax_revenue[t - 1]
+            - foreign_aid[t - 1]
         )
         r_gov[t] = get_r_gov(r[t], D[t] / Y[t], p, method="scalar", t=t)
         G[t] = (
             growth[t] * (p.debt_ratio_ss * Y[t])
             - (1 + r_gov[t]) * D[t]
             + total_tax_revenue[t]
+            + foreign_aid[t]
             - agg_pension_outlays[t]
             - I_g[t - 1]
             - TR[t]
@@ -171,6 +179,7 @@ def D_G_path(r, dg_fixed_values, p):
             + UBI_outlays[t]
             + agg_pension_outlays[t]
             - total_tax_revenue[t]
+            - foreign_aid[t]
         )
         D_ratio_max = np.amax(D[: p.T] / Y[: p.T])
         print("Maximum debt ratio: ", D_ratio_max)
@@ -284,12 +293,14 @@ def get_G_ss(
         G (tuple): steady-state government spending
 
     """
+    foreign_aid = p.alpha_FA * Y
     if p.budget_balance:
         G = p.alpha_G[-1] * Y
     else:
         G = (
             total_tax_revenue
             + new_borrowing
+            + foreign_aid
             - (agg_pension_outlays + TR + debt_service + UBI_outlays + I_g)
         )
 
@@ -354,9 +365,15 @@ def get_TR(
         new_TR (array_like): new value of aggregate government transfers
 
     """
+    foreign_aid = p.alpha_FA * Y
     if p.budget_balance:
         new_TR = (
-            total_tax_revenue - agg_pension_outlays - G - UBI_outlays - I_g
+            total_tax_revenue
+            + foreign_aid
+            - agg_pension_outlays
+            - G
+            - UBI_outlays
+            - I_g
         )
     elif p.baseline_spending:
         new_TR = p.alpha_bs_T[-1] * TR
@@ -422,7 +439,7 @@ def get_I_g(Y, Ig_baseline, p, method="SS"):
     Args:
         Y (array_like): aggregate output
         Ig_baseline (array_like): public infrastructure investment in
-            the baseliine simulation
+            the baseline simulation
         p (OG-Core Specifications object): model parameters
         method (str): either 'SS' for steady-state or 'TPI' for transition path
 

tests/test_aggregates.py

@@ -1764,22 +1764,9 @@ def test_resource_constraint(
     """
     Test resource constraint equation.
     """
-    # Y = np.array([48, 55, 2, 99, 8])
-    # C = np.array([33, 44, 0.4, 55, 6])
-    # G = np.array([4, 5, 0.01, 22, 0])
-    # I_d = np.array([20, 5, 0.6, 10, 1])
-    # I_g = np.zeros_like(I_d)
-    # net_capital_flows = np.array([0.1, 0, 0.016, -1.67, -0.477])
-    # RM1 = np.array([0.0, 0.0, 0.0, 0.0, 0.0])
-    # expected1 = np.array([-9.1, 1, 0.974, 13.67, 1.477])
     test_RC = aggr.resource_constraint(
         Y, C, G, I_d, I_g, net_capital_flows, RM
     )
-    # RM2 = np.array([0.0, 0.0, 0.0, 0.0, 0.03])
-    # expected2 = np.array([-9.1, 1, 0.974, 13.67, 1.477])
-    # test_RC2 = aggr.resource_constraint(
-    #     Y, C, G, I_d, I_g, net_capital_flows, RM2
-    # )
 
     assert np.allclose(test_RC, expected)
 

tests/test_fiscal.py

@@ -109,10 +109,12 @@ def test_D_G_path(
         "budget_balance": budget_balance,
         "r_gov_DY": r_gov_DY,
         "r_gov_DY2": r_gov_DY2,
+        "alpha_FA": [0.01],
     }
     p.update_specifications(new_param_values, raise_errors=False)
     r = np.ones(p.T + p.S) * 0.05
     p.g_n = np.ones(p.T + p.S) * 0.02
+    growth = (1 + p.g_n) * np.exp(p.g_y)
     D0_baseline = 0.59
     Gbaseline[0] = 0.05
     I_g = np.zeros_like(TR)
@@ -130,8 +132,18 @@ def test_D_G_path(
         D0_baseline,
     )
     test_tuple = fiscal.D_G_path(r, dg_fixed_values, p)
+    # update expected value for no-zero foreign aid
+    foreign_aid = p.alpha_FA[: p.T] * Y[: p.T] / (growth[1 : p.T + 1])
+    # expected_tuple[0][1: p.T] = expected_tuple[0][1: p.T] + foreign_aid[0: p.T-1]  # Debt
+    # expected_tuple[1][: p.T] = expected_tuple[1][: p.T] + (p.alpha_FA[: p.T] * Y[: p.T] / (1+growth[:p.T]))  # G
+    # expected_tuple[2][: p.T] = expected_tuple[2][1: p.T] - (p.alpha_FA[: p.T] * Y[: p.T] / (1+growth[:p.T]))  # Domestically held debt
+    # expected_tuple[5][: p.T] = expected_tuple[5][: p.T] - (p.alpha_FA[: p.T] * Y[: p.T] / (1+growth[:p.T]))  # New borrowing
+    print("Foreign aid = ", foreign_aid[:10])
+    print("Debt diff = ", test_tuple[0][:10] - expected_tuple[0][:10])
 
     for i, v in enumerate(test_tuple):
+        print(f"Testing {i}...")
+
         assert np.allclose(v[: p.T], expected_tuple[i][: p.T])