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GTAP Resource #3862

"A general equilibrium long-term path of the world economy"
by Fontagné, Lionel, Jean Fouré and Maria Priscila Ramos


Abstract
Historical evidence shows that the multilateral framework of globalisation is only slightly affected by big and temporary shocks, such as a financial crisis or a deep recession. This applies to what has been observed in the current crisis. However, slow-moving, long-term changes in comparative advantage, and shifts in the geopolitical equilibrium, are more problematic and are putting the multilateral system at risk (Irwin and O’Rourke, 2011). This suggests that efforts should be devoted by trade economists to discerning the long term path of the world economy (Chappuis and Walmsley, 2011).
Thinking of how the relative sizes of countries and how the geography of world production and trade will be affected in the long run must be based on sound economic reasoning about the determinants of long term growth. It must also be embedded in a general equilibrium framework that takes account of the interactions among markets and sectors and between countries. This paper takes stock of a two phase research project.
The first step consists of deriving and estimating a three-factor (labour, capital, energy) macroeconomic growth model (MaGE - Macroeconometrics of the Global Economy) for individual countries that fits two forms of technological progress (classical TFP and energy efficiency). A preliminary version of the model (Fouré et al., 2010) has been profoundly reshaped and has delivered a new set of publicly available macroeconomic projections (see: https://www.gtap.agecon.purdue.edu/models/Dynamic/baseline/default.asp). The second step consists of plugging these projections into MIRAGE (Decreux and Valin, 2007), a CGE of the world economy calibrated to fit these projections.
In our three-factor growth model, we apply a nested Constant Elasticity of Substitution (CES) production function (energy and a Cobb-Douglas combination of capital and labour). The nesting was proposed by David and van de Klundert (1965) to encompass different kinds of input-augmenting technic...


Resource Details (Export Citation) GTAP Keywords
Category: 2012 Conference Paper
Status: Published
By/In: Presented at the 15th Annual Conference on Global Economic Analysis, Geneva, Switzerland
Date: 2012
Version:
Created: Fontagné, L. (4/29/2012)
Updated: Fontagné, L. (7/3/2012)
Visits: 1,929
- Dynamic modeling
- Calibration and parameter estimation
- Baseline development


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