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GTAP Resource #5484

"Achieving a long-run equilibrium in the dynamic GTAP model"
by Gretton, Paul


Abstract
A dynamic version of the GTAP model became available in 2012. The dynamic version known as GDyn, introduced partial adjustment mechanisms for capital accumulation and a dynamic accounting of capital-finance and related income flows between regional households and firms, and a global trust. In long-run equilibrium, the model rates of return are to be equal and constant over time. In practice, illustrative results presented with the release of GDyn show the equilibrium conditions are not satisfied. This paper confirms this model property. It finds that this gives rise to model instability which limits the use of GDyn for the analysis of economic growth within a neoclassical framework. To achieve model stability and overcome this limitation, modelling of rates of return and capital-finance flows is further developed within the GDyn framework to satisfy the stated longer-run neoclassical equilibrium conditions. Results of the revised model demonstrating a stable, long-run equilibrium are reported together with an illustrative policy simulation of a productivity improving technological change in a medium-sized open economy. Some key areas for further research are identified.


Resource Details (Export Citation) GTAP Keywords
Category: 2018 Conference Paper
Status: Published
By/In: Presented at the 21st Annual Conference on Global Economic Analysis, Cartagena, Colombia
Date: 2018
Version: April
Created: Gretton, P. (4/11/2018)
Updated: Gretton, P. (7/2/2018)
Visits: 513
- Dynamic modeling
- Model validation
- Trade and the environment
- Economic growth
- Technological change
- The GTAP Data Base and extensions


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