How to impose a constraint or an equilibrium on Vensim?

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hasbito
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Joined: Mon Apr 10, 2017 6:15 pm
Vensim version: PLE

How to impose a constraint or an equilibrium on Vensim?

Post by hasbito »

Hi guys,

I'm currently working on a model for small open economy. I couldn't find a way to impose an equality or constraint to the model.
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I want desired domestic money holdings and domestic money holdings to be equal. Also, if money holdings > desired money, interest rate will decrease or if money holdings < desired money, interest rate will rise. How I can integrate such things to the model?

I'd be very grateful if you help me.
tomfid
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Joined: Wed May 24, 2006 4:54 am

Re: How to impose a constraint or an equilibrium on Vensim?

Post by tomfid »

I think the obvious thing to do here would be to make either the interest rate of the stock of domestic money holdings a stock that adjusts in response to pressure.

For example, you might have:

Actual holdings = INTEG( change in holdings, initial holdings )
change in holdings = (Desired holdings - actual holdings)/time to change holdings

You can impose constraints via penalty functions in the optimizer, or via the SIMULTANEOUS and FIND ZERO functions, but we don't generally have constraints in the language. There's a good reason for this, which is that reality doesn't have them either. Where they exist (at least as an equilibrium tendency), it's due to feedback structure that can be specified, as above. They are sometimes an analytic convenience, but frequently people use them to build a wall of constraints to conceal bad model behavior.
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