# State and Local Government Expenditures

## Changes to the FRB/US Model

- We have simplified and reduced the expenditure-side of the state and local government sector.

- We have consolidated the state and local government consumption (EGSO) and investment (EGSI) expenditure into one series (EGSE).

Old model

    d(log(egso)) - egso_aerr =
    y_egso(1)
     + y_egso(2)*log(egso(-1)/egsot(-1))
     + y_egso(3)* d(log(egso(-1)))
     + y_egso(4)* d(log(egso(-2)))
     + y_egso(5)*d(log(egsot))
     + y_egso(6)* xgap2
     + y_egso(7)* xgap2(-1)

    d(log(egsi)) - egsi_aerr =
    y_egsi(1)
     + y_egsi(2)*log(egsi(-1)/egsit(-1))
     + y_egsi(3)* d(log(egsi(-1)))
     + y_egsi(4)* d(log(egsi(-2)))
     + y_egsi(5)*d(log(egsit))
     + y_egsi(6)* xgap2
     + y_egsi(7)* xgap2(-1)

New model

    d(log(egse)) - egse_aerr =
    y_egse(1)
     + y_egse(2)*log(egse(-1)/egset(-1))
     + y_egse(3)* d(log(egse(-1)))
     + y_egse(4)* d(log(egse(-2)))
     + y_egse(5)*d(log(egset))
     + y_egse(6)* xgap2
     + y_egse(7)* xgap2(-1)

- We have done the same for their nominal (EGSON and EGSIN), trend (EGSOT and EGSIT) and relative price (PGSOR and PGSIR) counterparts.

Old model

    egson - egson_aerr = .01*pxp*pgsor*egso

    egsin - egsin_aerr = .01*pxp*pgsir*egsi

New model

    egsen - egsen_aerr = pegsr*pxp*egse*.01

Old model

    d(log(egsot)) - egsot_aerr
     = y_egsot(1)
     + y_egsot(2)*log(.01*pgsor(-1)*pxp(-1)*egsot(-1)/xgdptn(-1))
     + y_egsot(3)*(hggdpt + hggdpt(-1) + hggdpt(-2) + hggdpt(-3))/1600

    d(log(egsit)) - egsit_aerr
     = y_egsit(1)
     + y_egsit(2)*log(.01*pgsir(-1)*pxp(-1)*egsit(-1)/xgdptn(-1))
     + y_egsit(3)*(hggdpt + hggdpt(-1) + hggdpt(-2) + hggdpt(-3))/1600

New model

    d(log(egfet)) - egfet_aerr = y_egfet(1)
     + y_egfet(2)*log(.01*pegfr(-1)*pxp(-1)*egfet(-1)/xgdptn(-1))
     + y_egfet(3)*(hggdpt + hggdpt(-1) + hggdpt(-2) + hggdpt(-3))/1600

Old model

    log(pgsor) - pgsor_aerr - log(pgsor(-1)) = y_pgsor(1) + pipxnc/400
     + dpadj - d(log(pxp))

    log(pgsir) - pgsir_aerr - log(pgsir(-1)) = y_pgsir(1) + pipxnc/400
     + dpadj - d(log(pxp))

New model

    log(pegsr) - pegsr_aerr = log(pegsr(-1)) + pipxnc/400
     + dpadj - d(log(pxp))

## Some details about the changes and simplifications

- The consolidation of the state and local government spending equations has allowed the elimination of:
  - EGS: State and Local government consumption and gross investment, cw
  - EGSN: State and Local government consumption and gross investment, current $