import numpy as np import matplotlib.pyplot as plt from matplotlib.widgets import Slider, RadioButtons class MundellFlemingSim: def __init__(self): # Initial Parameters self.Y = np.linspace(0, 200, 200) self.lm_slope = 0.5 self.bp_slope = 0.0 # Starts at Perfect Mobility # Base Intercepts (Pre-shock) self.is_intercept_base = 100 self.lm_intercept_base = -20 self.bp_intercept_base = 30 # Shocks (Controlled by Sliders) self.g_shock = 0 self.m_shock = 0 # Settings self.mobility = 'Perfect' # Perfect, High, Low self.regime = 'Floating' # Fixed, Floating # Setup Plot self.fig, self.ax = plt.subplots(figsize=(10, 7)) plt.subplots_adjust(left=0.1, bottom=0.35) self.setup_widgets() self.update(None) def solve_intersection(self, m1, c1, m2, c2): # Solve for Y where m1*Y + c1 = m2*Y + c2 if m1 == m2: return None # Parallel Y_sol = (c2 - c1) / (m1 - m2) r_sol = m1 * Y_sol + c1 return Y_sol, r_sol def update(self, val): self.ax.clear() self.ax.set_xlim(0, 200) self.ax.set_ylim(0, 100) self.ax.grid(True, alpha=0.3) self.ax.set_title(f"Mundell-Fleming: {self.regime} Rate, {self.mobility} Mobility") self.ax.set_xlabel("Income (Y)") self.ax.set_ylabel("Interest Rate (r)") # 1. Update Parameters based on Widgets self.g_shock = self.s_fiscal.val self.m_shock = self.s_money.val # Mobility Logic if self.mobility == 'Perfect': self.bp_slope = 0 elif self.mobility == 'Imperfect (High)': self.bp_slope = 0.2 # Flatter than LM (0.5) elif self.mobility == 'Imperfect (Low)': self.bp_slope = 0.8 # Steeper than LM (0.5) # 2. Define Curves (Short Run) # IS: r = -0.5Y + (Base + G_Shock) is_slope = -0.5 is_int_sr = self.is_intercept_base + self.g_shock # LM: r = 0.5Y + (Base + M_Shock) lm_int_sr = self.lm_intercept_base - self.m_shock # Money supply increase lowers intercept # BP: r = slope*Y + Base # Note: BP intercept usually doesn't shift with G or M directly in simple models bp_int = self.bp_intercept_base # 3. Solve Short Run Equilibrium (IS = LM) Y_sr, r_sr = self.solve_intersection(is_slope, is_int_sr, self.lm_slope, lm_int_sr) # 4. Calculate BP at Short Run Y r_bp_at_sr = self.bp_slope * Y_sr + bp_int # Determine Surplus or Deficit bp_gap = r_sr - r_bp_at_sr status = "Balance" if bp_gap > 0.5: status = "Surplus" elif bp_gap < -0.5: status = "Deficit" # 5. Calculate Final Equilibrium (The Adjustment) Y_final, r_final = Y_sr, r_sr is_int_final = is_int_sr lm_int_final = lm_int_sr if self.regime == 'Fixed': # CB defends peg. # If Surplus -> Buy FX, Sell Dom -> M increases -> LM Shifts Right # If Deficit -> Sell FX, Buy Dom -> M decreases -> LM Shifts Left # Target: IS (Shocked) intersects BP. Y_final, r_final = self.solve_intersection(is_slope, is_int_sr, self.bp_slope, bp_int) # Recalculate LM to pass through this point: r = 0.5Y + C => C = r - 0.5Y lm_int_final = r_final - self.lm_slope * Y_final elif self.regime == 'Floating': # Market adjusts Exchange Rate. # If Surplus -> Appreciation -> NX falls -> IS Shifts Left # If Deficit -> Depreciation -> NX rises -> IS Shifts Right # Target: LM (Shocked) intersects BP. Y_final, r_final = self.solve_intersection(self.lm_slope, lm_int_sr, self.bp_slope, bp_int) # Recalculate IS to pass through this point: r = -0.5Y + C => C = r + 0.5Y is_int_final = r_final - is_slope * Y_final # 6. Plotting # Plot Lines self.ax.plot(self.Y, is_slope*self.Y + is_int_sr, label='IS (Short Run)', color='blue', linestyle='--') self.ax.plot(self.Y, self.lm_slope*self.Y + lm_int_sr, label='LM (Short Run)', color='red', linestyle='--') self.ax.plot(self.Y, self.bp_slope*self.Y + bp_int, label='BP', color='green', linewidth=2) # Plot Final Curves (Ghost lines) if self.regime == 'Fixed': self.ax.plot(self.Y, self.lm_slope*self.Y + lm_int_final, label='LM (Final)', color='red', alpha=0.3) else: self.ax.plot(self.Y, is_slope*self.Y + is_int_final, label='IS (Final)', color='blue', alpha=0.3) # Plot Points self.ax.scatter([Y_sr], [r_sr], color='orange', s=100, zorder=5, label=f'Short Run ({status})') self.ax.scatter([Y_final], [r_final], color='black', s=100, zorder=5, label='Final Eq') # Arrows self.ax.annotate('', xy=(Y_final, r_final), xytext=(Y_sr, r_sr), arrowprops=dict(facecolor='black', shrink=0.05, width=1.5)) self.ax.legend(loc='upper left') self.fig.canvas.draw_idle() def setup_widgets(self): # Sliders ax_fiscal = plt.axes([0.15, 0.2, 0.65, 0.03]) ax_money = plt.axes([0.15, 0.15, 0.65, 0.03]) self.s_fiscal = Slider(ax_fiscal, 'Fiscal (G)', -40, 40, valinit=0) self.s_money = Slider(ax_money, 'Money (M)', -40, 40, valinit=0) self.s_fiscal.on_changed(self.update) self.s_money.on_changed(self.update) # Radio Buttons ax_radio_mob = plt.axes([0.02, 0.4, 0.12, 0.15]) self.radio_mob = RadioButtons(ax_radio_mob, ('Perfect', 'Imperfect (High)', 'Imperfect (Low)')) self.radio_mob.on_clicked(self.set_mobility) ax_radio_reg = plt.axes([0.02, 0.6, 0.12, 0.15]) self.radio_reg = RadioButtons(ax_radio_reg, ('Floating', 'Fixed')) self.radio_reg.on_clicked(self.set_regime) def set_mobility(self, label): self.mobility = label self.update(None) def set_regime(self, label): self.regime = label self.update(None) if __name__ == '__main__': sim = MundellFlemingSim() plt.show()