4 The firm and the rest of the model
To summarise the interaction the production block has with the demand side of the model and the labour market, consider Tables 2 and 3 and Figures 8 and 9 which outline the variables that are inputs into the production block from the labour market and the demand side of the model and those which are outputs from the production block that feed into other parts of the model.
| Endogenous to the production block which feed into other parts of the model | Exogenous to the production block (come from other parts of the model or are imposed) |
|---|---|
| Medium-run private sector hours paid | Demand for “other goods” |
| Medium-run relative price of “other goods” | Private sector business capital stock |
| Medium-run commodity export production | Wages relative to the price of “other goods” |
| Medium-run demand for imported intermediates | The relative price of commodity exports and of imported intermediates |
| The relative rental price of capital |
| Endogenous to the production block which feed into other parts of the model | Exogenous to the production block (come from other parts of the model or are imposed) |
|---|---|
| Demand for “other goods” | Required rate of return on capital relative to the price of “other goods” |
| Private sector business capital stock | Private sector hours paid |
| Wages relative to the price of “other goods” | The relative price of commodity exports and of imported intermediates |
| Commodity export production | The relative price of “other goods” |
| Imported intermediates |
- Figure 8: The production block and the rest of the model (dynamic model)
- Figure 9: Production block and the rest of the model (steady state)
In the remainder of Section 4 we outline some of the equations (business investment, exports and labour market) that depend on the production block values.
