The Simplest Dynamic General-Equilibrium Model of an Open Economy

Devarajan, Shantayanan; Go, Delfin S.

doi:10.1016/s0161-8938(98)00011-8

Cited by 82 publications

(55 citation statements)

References 13 publications

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“…This outcome differs from those reported in the existing literature (e.g., Go, 1994;Devarajan and Go, 1998 ) where the long-run impact differs in both models. Major concern over incorporating forward-looking expectations has arisen when the policy to be evaluated has intrinsic long-run effects (as in trade liberalization policy, for example).…”

Section: Introductioncontrasting

confidence: 99%

“…The models solve complex optimization problems within periods in order to determine the best allocation of resources. However, between periods they remain myopic, with consumption, saving and investment decisions abstracting from future periods (Devarajan and Go, 1998). We argue in this paper that such differences are the result of the different adjustment mechanisms incorporated into these models and not, in fact, the consequence of assuming myopia as against perfect foresight.…”

Section: Introductionmentioning

confidence: 87%

“…Major concern over incorporating forward-looking expectations has arisen when the policy to be evaluated has intrinsic long-run effects (as in trade liberalization policy, for example). Go (1994) and Devarajan and Go (1998) argue that myopic models fail to capture dynamic policy gains and, consequently, produce both inaccurate and incorrect results. For example, Devarajan and Go (1998) claim to demonstrate that the welfare gains of eliminating trade tariffs are greater in forward-looking models than in static models 3 .…”

Section: Introductionmentioning

confidence: 99%

“…Go (1994) and Devarajan and Go (1998) argue that myopic models fail to capture dynamic policy gains and, consequently, produce both inaccurate and incorrect results. For example, Devarajan and Go (1998) claim to demonstrate that the welfare gains of eliminating trade tariffs are greater in forward-looking models than in static models 3 . 8 However, the underlying reason for these results is related, as we explain later, to the asymmetric model specifications incorporated in both models.…”

Section: Introductionmentioning

confidence: 99%

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Forward-looking and myopic regional Computable General Equilibrium models: How significant is the distinction?

2013

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We present a stylized intertemporal forward-looking model able that accommodates key regional economic features, an area where the literature is not well developed. The main difference, from the standard applications, is the role of saving and its implication for the balance of payments. Though maintaining dynamic forward-looking behaviour for agents, the rate of private saving is exogenously determined and so no neoclassical financial adjustment is needed. Also, we focus on the similarities and the differences between myopic and forwardlooking models, highlighting the divergences among the main adjustment equations and the resulting simulation outcomes.JEL classification: C68; D58; D91; R10

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Section: Introductioncontrasting

confidence: 99%

Section: Introductionmentioning

confidence: 87%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Forward-looking and myopic regional Computable General Equilibrium models: How significant is the distinction?

2013

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“…As this requirement would have to bind after certain time, there is no assurance, however, that the system will thus converge to a point close to the steady state. The majority of models in the literature use this method (e.g., Devarajan and Go (1998) or Diao and Somwaru (2000)). …”

Section: Introductionmentioning

confidence: 99%

Forward looking dynamics in spatial CGE modelling

Bröcker

Korzhenevych

2013

Economic Modelling

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper sets up a multiregional dynamic framework by combining the optimal savings model with investment adjustment costs and the spatially disaggregated model with Dixit-Stiglitz structure in the modern sector. Because of increasing product diversity on the dynamic equilibrium path, the model belongs to the category of semi-endogenous growth models. The distinction of goods, factors, firms, and households by location, and the incorporation of trade costs in the model allow to study a variety of issues in regional and transport economics. We describe the model calibration and a taylor-made solution algorithm. The functionality is demonstrated using two illustrative examples. Terms of use: Documents in EconStor may

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Economic impacts of bio‐refinery and resource cascading systems: An applied general equilibrium analysis for Poland

Ignaciuk

Sanders

2007

Biotechnology Journal

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Due to more stringent energy and climate policies, it is expected that many traditional chemicals will be replaced by their biomass-based substitutes, bio-chemicals. These innovations, however, can influence land allocation since the demand for land dedicated to specific crops might increase. Moreover, it can have an influence on traditional agricultural production. In this paper, we use an applied general equilibrium framework, in which we include two different bio-refinery processes and incorporate so-called cascading mechanisms. The bio-refinery processes use grass, as one of the major inputs, to produce bio-nylon and propane-diol (1,3PDO) to substitute currently produced fossil fuel-based nylon and ethane-diol. We examine the impact of specific climate policies on the bioelectricity share in total electricity production, land allocation, and production quantities and prices of selected commodities. The novel technologies become competitive, with an increased stringency of climate policies. This switch, however, does not induce a higher share of bioelectricity. The cascade does stimulate the production of bioelectricity, but it induces more of a shift in inputs in the bioelectricity sector (from biomass to the cascaded bio-nylon and 1, 3PDO) than an increase in production level of bioelectricity. We conclude that dedicated biomass crops will remain the main option for bioelectricity production: the contribution of the biomass systems remains limited. Moreover, the bioelectricity sector looses a competition for land for biomass production with bio-refineries.

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The Simplest Dynamic General-Equilibrium Model of an Open Economy

Cited by 82 publications

References 13 publications

Forward-looking and myopic regional Computable General Equilibrium models: How significant is the distinction?

Forward-looking and myopic regional Computable General Equilibrium models: How significant is the distinction?

Forward looking dynamics in spatial CGE modelling

Economic impacts of bio‐refinery and resource cascading systems: An applied general equilibrium analysis for Poland

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