Textbook of Computable General Equilibrium Modelling: Programming and Simulations

✍ Scribed by Nobuhiro Hosoe, Kenji Gasawa, Hideo Hashimoto

• Publisher: Palgrave Macmillan
• Year: 2010
• Tongue: English
• Leaves: 256
• Category: Library

✦ Synopsis

Computable General Equilibrium (CGE) models have been widely used for various economic simulations, such as, trade liberalization, environmental problems, and regulatory and tax reforms. CGE models are powerful but tend to be large-scale and, therefore, often difficult to learn. This book provides a comprehensive A-to-Z guide for CGE models. Focusing on its practical application, readers can learn from the simplest CGE models, and proceed, in a step-by-step manner, to database construction, programming for computation, and developing more elaborated CGE models, which can be applied empirically to actual simulation purposes. Particular emphasis is placed on computer programs of CGE models. Readers can obtain knowledge and skills from which they can develop and operate their own CGE models, and apply them to their research. This book is essential reading for all interested in computational economics, advanced macroeconomics, international trade, regional development, development economics.

✦ Table of Contents

Cover......Page 1
Contents......Page 6
Abbreviations......Page 11
Symbols in CGE Models......Page 13
Tables, Figures and Lists......Page 16
Preface......Page 19
1.1 Economic analysis with computable general equilibrium models......Page 22
1.2 Framework of CGE models......Page 24
1.3 Advantages and shortcomings of CGE models......Page 26
1.5 Aims of this book......Page 27
1.6 Software and simulations on the PC......Page 29
1.7 Structure of this textbook......Page 31
2 The Simple CGE Model......Page 34
2.1 Setup of the economy......Page 35
2.2 Household behaviour......Page 36
2.3 Firm behaviour......Page 37
2.4 Market-clearing conditions......Page 39
2.5 Model system......Page 40
3.1 Example: the 'household utility maximization model'......Page 44
3.1.1 Formulation of the model......Page 45
3.2 Computational procedures......Page 46
3.3.1 Structure of input files and general syntax of GAMS......Page 48
3.3.2 Directives......Page 50
3.4 Results of computation in the output file......Page 57
4 The Social Accounting Matrix......Page 62
4.1.1 Social accounting matrix for the simple CGE model......Page 63
4.1.2 SAM for the standard CGE model......Page 65
4.2 Construction of social accounting matrix......Page 68
4.3 Example: Social accounting matrix for Japan......Page 71
4.4 Consistency among various databases and matrix adjustment for a SAM......Page 77
5.1 The basic concept of calibration......Page 82
5.2 Value, price and quantity......Page 84
5.3.1 The case without indirect taxes......Page 85
5.3.2 The case with indirect taxes......Page 90
5.4.1 Programming procedures and an input file......Page 91
5.4.2 Declaration and definition of sets......Page 94
5.4.3 Installation of the SAM......Page 95
5.4.4 Retrieval of data from the SAM......Page 96
5.4.5 Calibration......Page 97
5.4.7 Initial values for numerical computation......Page 99
5.4.8 Uses of lower bounds......Page 100
5.5 Solution of the simple CGE model......Page 101
6.1 Overview of the standard CGE model......Page 108
6.2 Intermediate inputs......Page 110
6.3 Government......Page 113
6.4.1 Introduction of investment and savings......Page 114
6.4.2 Modification of household and government behaviour......Page 116
6.5.1 Small-country assumption and balance of payments......Page 117
6.5.2 Armington's assumption......Page 118
6.5.3 Substitution between imports and domestic goods......Page 119
6.5.4 Transformation between exports and domestic goods......Page 120
6.6 Market-clearing conditions......Page 123
6.7 Model system......Page 124
6.8 GAMS programming......Page 127
6.8.1 Declaration of sets, installation of the SAM and derivation of the initial equilibrium values......Page 133
6.8.2 Calibration......Page 135
6.8.3 Model solution......Page 139
7 Macro Closure......Page 143
7.1 Investment and savings – macro closure in a closed economy model......Page 144
7.2 Current account balance – macro closure in an open economy model......Page 146
7.3 Other closure rules......Page 148
8 Simulating General Equilibria......Page 149
8.1 Multiple runs in one input file......Page 150
8.2 Computation of indicators from solved values......Page 152
8.3 Measurement of economic welfare......Page 154
8.4.1 The concept of sensitivity analysis......Page 158
8.4.2 Example of sensitivity analysis with the standard CGE model......Page 159
8.4.3 Sensitivity analysis with a three-sector model......Page 160
9 Interpretation of Simulation Results......Page 165
9.1.1 A small open economy......Page 166
9.1.2 Impact of import tariffs......Page 170
9.1.3 Impact of transfers from abroad......Page 172
9.1.4 Impact of terms of trade shock......Page 173
9.2 Two-sector model......Page 174
10.1 Multihousehold model......Page 179
10.2 Large-country model......Page 182
10.3.1 Two-country model......Page 188
10.3.2 Multicountry model......Page 195
10.4.1 Monopoly model......Page 197
10.5 Quantitative restrictions......Page 203
10.6 Increasing-returns-to-scale model......Page 208
11.1 Extensions inside the CGE models......Page 212
11.2 Extensions outside the CGE models......Page 213
11.3 Concluding remarks for better CGE modelling......Page 214
Appendix I: Derivation of Household Demand Functions......Page 216
Appendix II: Competitive Equilibrium vs Social Optimum......Page 217
Appendix III: Utility Maximization and Lagrange Multipliers......Page 220
Appendix IV: Reformulation of a System of Simultaneous Equations into an Optimization Problem......Page 221
Appendix V: Leontief-type Function and Optimization......Page 223
A.1.2 Alias of a set......Page 225
A.2 Setting values with formula......Page 226
A.3 Large Table data input......Page 227
A.4.1 Printing variables and constants......Page 228
A.5 Communicating with spreadsheet software......Page 229
A.5.1 Transfer of data in an input file into a spreadsheet......Page 230
A.5.2 Transfer of data from a spreadsheet into a GDX file......Page 232
B.1 Case 1: Compilation error......Page 234
B.2 Case 2: Execution error and Case 3: Solve error......Page 237
B.3 Case 4a: No base run equilibrium solution......Page 241
B.4 Case 4b: No counterfactual equilibrium solution......Page 242
B.6 Capacity limitation of GAMS......Page 243
Annex C: Web Resources......Page 245
References......Page 247
Index......Page 250
GAMS Index......Page 255