New macro economic indicators

[David]

Will fluctuations in interest rates, GDP and inflation have an impact on the currency "exchange rates"? (and thus the price ratios between different economies?)

I know this will be difficult to model given that everything is modelled around a single currency. It could be done by adding a variable to the inflation parameter which will look at the economic indicators of a given country in relationship to the "global" average, but this would be sort of wrong as it's not inflation per se.

As it is now the economies are like isolated islands, the players being the only "bridge builders" and thereby making it too easy to reap the benefits of international trade even in the long term. I would much more like to see (or have the option to see) an economic model where cities are affecting and being affected by eachother dynamically, thereby forcing players to adapt to changes or risk losing their competitive edge.

You may want to check out this thread discussing Exchange Rates:
viewtopic.php?f=4&t=19

Can you give examples of what you might do to reap the benefits of international trade even in the long term? I want to understand more what you think on this.

[David]

The table below indicates whether a variable is local or global.

In the real world, all these variables should be local. For instance, the inflation rate in New York should be different than that in London.

To have a local inflation, exchange rates must exist.

We have to make inflation rate a global variable because we decided not to implement exchange rates in the game.

Also, having local inflation rates will make the gameplay too complicated and overwhelming to play. Thus, we rather go for a nice balance between gameplay and realism, rather than realism taking all the precedence.

If you have any suggestions, let us know.

[David]

I know this will be difficult to model given that everything is modelled around a single currency. It could be done by adding a variable to the inflation parameter which will look at the economic indicators of a given country in relationship to the "global" average, but this would be sort of wrong as it's not inflation per se.

How exactly do you think this can be implemented ? What kind of variable to be added on top of inflation? Having single exchange rate and different inflation rates in the game will allow the player to exploit it by buying products at a low price in one city and sell it at a high price in another city. When the price gap is large, the imbalance will seriously impact the gameplay.

[adj_boy]

Can you give examples of what you might do to reap the benefits of international trade even in the long term? I want to understand more what you think on this.

I was a bit quick on the drawer on this one as I didn't know some of the local variables followed a global trend. I thought each cities were isolated economic spheres, my apologies.

I know this will be difficult to model given that everything is modelled around a single currency. It could be done by adding a variable to the inflation parameter which will look at the economic indicators of a given country in relationship to the "global" average, but this would be sort of wrong as it's not inflation per se.

How exactly do you think this can be implemented ? What kind of variable to be added on top of inflation? Having single exchange rate and different inflation rates in the game will allow the player to exploit it by buying products at a low price in one city and sell it at a high price in another city. When the price gap is large, the imbalance will seriously impact the gameplay.

Again, I was not aware that inflation was a global modifier.

However, the idea of having different inflation rates shouldn't be a concern, as increased prices will lead to higher wages and therefore reduced investment -> reduced relative GDP growth in comparison to low cost cities which will be more attractive for investment. Given time, either low cost cities would catch up or high cost cities slow down. This is a macroeconomic phenomenon that could be implemented as an "auto-balancing" modifier representing general overseas investments by rich cities in poor cities. So overseas production will be profitable at first, but less so as the price level between the trading cities is reduced.

By the way, by "buying" products, I assume producing products?

Can I ask what the CPI variable is representing? CPI is just one indiciator of an economy's inflation. Since this modifier is local, you could make fluctuations in interest rates & GDP growth/money supply & demand of a city affect this variable instead of the global inflation level, which in turn perhaps could be an aggregate of the individual CPI percentage increases.

[David]

Can I ask what the CPI variable is representing? CPI is just one indiciator of an economy's inflation. Since this modifier is local, you could make fluctuations in interest rates & GDP growth/money supply & demand of a city affect this variable instead of the global inflation level, which in turn perhaps could be an aggregate of the individual CPI percentage increases.

CPI is an index that increased on a compound basis by the current inflation rate.

In the beginning of the game, each city starts with a different Initial CPI value. A city in a developing country has a lower Initial CPI, whereas a city in a developed country has a higher Initial CPI.

Each year, the CPI index increases at the inflation rate.

Basically CPI is one aspect of inflation. The inflation rate also affect other aspects shown in the table below:

Does this make sense to you? Is it clear?

[David]

Again, I was not aware that inflation was a global modifier.

However, the idea of having different inflation rates shouldn't be a concern, as increased prices will lead to higher wages and therefore reduced investment -> reduced relative GDP growth in comparison to low cost cities which will be more attractive for investment. Given time, either low cost cities would catch up or high cost cities slow down. This is a macroeconomic phenomenon that could be implemented as an "auto-balancing" modifier representing general overseas investments by rich cities in poor cities. So overseas production will be profitable at first, but less so as the price level between the trading cities is reduced.

In designing the marco-economic simulation component, we have factored in hyperinflation as a possible scenario. Under hyper-inflation, products can be several times more expensive in a very short period of time. For instance, with an inflation rate of 20%, a product will be 3800% more expensive in just 20 years.

Since we decided not to implement currency exchange rates, if there is a city with hyper-inflation of 20% and another city with normal inflation of 5%, there is a huge price gap that easily make the gameplay off-balance. A player can buy goods from the city with normal inflation - say $2 for a bottle milk and sell it in the city with hyperinflation - $2 x 38 = $76 for the same bottle, a profit of 38 times!

[adj_boy]

Does this make sense to you? Is it clear?

Let's see

Cities start out with individual CPI levels, which increase at the rate of inflation across all cities. Since global inflation is its only modifier, low cost cities will stay low cost and high cost cities will stay high cost in relation to each other (Or they will eventually reach a max level).

I take it then that the CPI levels are an indicator of the cities' price levels of the items you listed, which are increased by the inflation rate.

In which case, is it possible to add individual modifiers to CPI changes in addition to inflation? For example, modifiers based on investments by the player, economic climate and employment rate would realisticly depict real life changes to local price level, and would make the economy more dynamic. It would open for the different cities' price levels to converge, forcing players to relocate their investments or create new markets for luxury products.

[adj_boy]

Again, I was not aware that inflation was a global modifier.

However, the idea of having different inflation rates shouldn't be a concern, as increased prices will lead to higher wages and therefore reduced investment -> reduced relative GDP growth in comparison to low cost cities which will be more attractive for investment. Given time, either low cost cities would catch up or high cost cities slow down. This is a macroeconomic phenomenon that could be implemented as an "auto-balancing" modifier representing general overseas investments by rich cities in poor cities. So overseas production will be profitable at first, but less so as the price level between the trading cities is reduced.

In designing the marco-economic simulation component, we have factored in hyperinflation as a possible scenario. Under hyper-inflation, products can be several times more expensive in a very short period of time. For instance, with an inflation rate of 20%, a product will be 3800% more expensive in just 20 years.

Since we decided not to implement currency exchange rates, if there is a city with hyper-inflation of 20% and another city with normal inflation of 5%, there is a huge price gap that easily make the gameplay off-balance. A player can buy goods from the city with normal inflation - say $2 for a bottle milk and sell it in the city with hyperinflation - $2 x 38 = $76 for the same bottle, a profit of 38 times!

Indeed, whithout currency exchange, such a scenario would be impossible to implement with individual inflation.

[ajpiper2k]

Will fluctuations in interest rates, GDP and inflation have an impact on the currency "exchange rates"? (and thus the price ratios between different economies?)

I know this will be difficult to model given that everything is modelled around a single currency. It could be done by adding a variable to the inflation parameter which will look at the economic indicators of a given country in relationship to the "global" average, but this would be sort of wrong as it's not inflation per se.

As it is now the economies are like isolated islands, the players being the only "bridge builders" and thereby making it too easy to reap the benefits of international trade even in the long term. I would much more like to see (or have the option to see) an economic model where cities are affecting and being affected by eachother dynamically, thereby forcing players to adapt to changes or risk losing their competitive edge.

I totally agree. However, I love the new macro economic indicators.

Andy

[Webby64286]

This adds way too much micromanagement to the game (I'm sure I could turn it off but I like playing at or near the most difficult level so I can get the highest score) Right now this is mostly information I do not want and will not use. Fix the problems with complex economy and maybe this is helpful to me. The problem with complex economy, by the way, is that if I make goods in China to save money on costs and then ship them to wealthier markets, freight charges eat up any savings. I've also had cities go into free fall (panic for years at a time) and no amount of factories or R&D centers by me or the AI could make it rebound.