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Govt On-BalanceSheet Fiscal Mechanics(Govt Assets)Govt Off-Balance SheetSpecial Purpose Entity(Derisking mechanism)2. Production Agents2. Pure expendituresgovt.Gd -= govt.G# Reserve add op.1. Opening debt before transactions this step:govt.GD_Open = govt.GD3. Pay interest on the bills heldby households and the central bank.1. Government Agent DomainGovt Assets5. Issue bills: Calculate deficit and add to stock of bills. govt.GD_Change = govt.GD_Close - govt.GD_Open.# Add the change (+ve / -ve) to the stock of bills issued.govt.Bs += govt.GD_Change # ΔBs: Add the change (+ve / -ve)HealthEducationEnergyHousingTransportetc.3. HouseholdAgentsTypes4. Central Bank Agent:Lender / Market-Makerof Last Resort4. Treasury & debt office coordination.expenditures = govt.Gd + govt.INT_Bcb + govt.INT_Bhrevenues = self.Td + self.Fcbgovt.GD = expenditures - revenuesgovt.GD_Close = govt.GDEmployment& wages AlphaBetaGammaPay tax to govtPrivate Finance (PF) Agents:- Banks,- Corporations- Asset-Manager Global Savings- Money Market Funds- Private Equity- Hedge FundsConsumption demandsSavewealth(Bh)Save: (wealth - PF mgmnt fee) Profit on govt bills (Fcb)Partnership Infrastructure(PPP) Long-Term Contracts:Residual purchase billsLiquify fin. assetsSet rate on govt billsHealth, Education, EnergyPrison, Transport, etc.Mix of user fee& public serviceEligible CollateralFramework- PF Fin. AssetsLiquidity risk &market failureAssume demand / construction risk.Maintenance & service charges.PF InvestmentCashflowsGovt ManagedInfrastructureGovt Assets (Bcb)www.GiltEdged.infoPublicservicePF expenditureSecurities &new creditcreationInterest & dividendsSensitive to govt asset prices.(Velocity of govt asset & int rate affect)Primary & Securities DealersREPURCHASE AGREEMENT(REPO) & FX SWAP MARKETSMacrofinancial Context: Bounded Sketch of Government Money Model (Blue) & Evolving Private Finance (Red)0. Household (Public) Obligation to GovtRW: Residual purchasevia primary dealersGovtPPP&IntrastructureRW: AuctionRW: Real-World