Handbook of Computable General Equilibrium Modeling, Volume 1A-1B

Top scholars synthesize and analyze scholarship on this widely used tool of policy analysis in 27 articles, setting forth its accomplishments, difficulties, and means of implementation. Though CGE modeling does not play a prominent role in top U.S. graduate schools, it is employed universally in the development of economic policy. This collection is particularly important because it presents a history of modeling applications and examines competing points of view.

• Presents coherent summaries of CGE theories that inform major model types
• Covers the construction of CGE databases, model solving, and computer-assisted interpretation of results
• Shows how CGE modeling has made a contribution to economic policy

Graduate students and professors worldwide working in all subdisciplines of economics and finance

Introduction to the Series

Contributors

Preface

Chapter 1. Introduction

1.1 Overview

1.2 Single-country models

1.3 Global models

1.4 Technical aspects of CGE modeling: data, parameter estimation, computation and validation

1.5 Current cutting-edge methodological areas

References

Chapter 2. The MONASH Style of Computable General Equilibrium Modeling: A Framework for Practical Policy Analysis

2.1 Introduction

2.2 Telling a CGE Story

2.3 From Johansen to ORANI

2.4 Extending Johansen’s Computational Framework: The Mathematical Structure of a MONASH Model

2.5 Responding to the Needs of CGE Consumers: The Four Closure Approach

2.6 Concluding Remarks

Acknowledgments

References

Chapter 3. Computable General Equilibrium Assessments of Fiscal Sustainability in Norway

3.1 Introduction

3.2 Model Structure

3.3 Evaluating Fiscal Sustainability

3.4 Sensitivity of the Fiscal Prospects to Variations in Economic Growth and Terms of Trade

3.5 Norwegian Public Pension Reform

3.6 Demographic Uncertainty

3.7 Increasing Prefunding Through a Stricter Fiscal Policy Rule

3.8 Final Remarks

References

Chapter 4. MAMS – A Computable General Equilibrium Model for Developing Country Strategy Analysis

4.1 Introduction

4.2 Context and Main Contributions of MAMS

4.3 Model Design

4.4 Mathematical Structure of MAMS

4.5 MAMS Database

4.6 User-friendly Interface

4.7 Applications: Policy Issues and Insights

4.8 Conclusion

References

Chapter 5. Contribution of Computable General Equilibrium Modeling to Policy Formulation in Developing Countries

5.1 Introduction

5.2 Types of CGE Models for Development Policy

5.3 CGE Models and Policy Formulation

5.4 Conclusions

Acknowledgments

References

Chapter 6. Putting Services and Foreign Direct Investment with Endogenous Productivity Effects in Computable General Equilibrium Models

6.1 Introduction

6.2 Modeling Services and FDI in a Stylized Small CGE Model

6.3 Impact of Liberalizing Barriers to FDI in Services: the Case of Russian Accession to the World Trade Organization

6.4 Poverty Effects Of Russia’s Wto Accession: modeling “Real” Households With Fdi In Services And Endogenous Productivity Effects

6.5 Policy Impacts and Other Model Applications and Extensions

Acknowledgments

References

Chapter 7. Regional Computable General Equilibrium Modeling

7.1 Introduction

7.2 What Regional Models Can Tell Us

7.3 Short Review of the Development of Regional CGE Models

7.4 A Modern Multiregional CGE Model

7.5 Constructing (Multi)regional Databases

7.6 Simulations and Interpretation of Multiregional Model Mechanisms

7.7 Concluding Remarks

Acknowledgments

References

Chapter 8. Energy, the Environment and US Economic Growth

8.1 Introduction

8.2 IGEM

8.3 Intertemporal Equilibrium and Economic Growth

8.4 Welfare measurement

8.5 Evaluation of climate policy

8.6 Conclusions

References

Chapter 9. Computable General Equilibrium Modeling of Environmental Issues in Australia

9.1 Introduction

9.2 MMRF

9.3 Additional Enhancement for ETS Modeling

9.4 Base Case

9.5 ETS Simulation Design

9.6 Economic Effects of the ETS

9.7 Conclusion

References

Chapter 10. Taxation, Efficiency and Economic Growth

10.1 Introduction

10.2 Modeling Economic Growth

10.3 Modeling Consumer and Producer Behavior

10.4 Economic Impact of Tax Reform

10.5 Income Tax Reform

10.6 Consumption Tax Reform

10.7 Conclusions

Acknowledgments

References

Chapter 11. Dynamic Overlapping Generations Computable General Equilibrium Models and the Analysis of Tax Policy: The Diamond–Zodrow Model

11.1 Introduction

11.2 Brief History of OLG-CGE Modeling of Tax Reform

11.3 Overview of the DZ model

11.4 Applications of the DZ Model

11.5 Conclusion

References

Chapter 12. Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework

12.1 Introduction: what is GTAP and why has it succeeded?

12.2 Design of the standard gtap modeling framework

12.3 Model validation and systematic sensitivity analysis

12.4 Software and implementation issues

12.5 GTAP-based analysis of global economic integration

12.6 CGE modeling of global environmental issues

12.7 Future directions for GTAP

Acknowledgments

References

Chapter 13. Estimating Effects of Price-Distorting Policies Using Alternative Distortions Databases

13.1 Introduction

13.2 Concern with Missing Price-Distorting Measures

13.3 Concern with the Counterfactual

13.4 Concern with Tariff Aggregation

13.5 Conclusions

Acknowledgments

References

Chapter 14. Modeling the Global Economy – Forward-Looking Scenarios for Agriculture

14.1 Introduction

14.2 Global Modeling at the World Bank

14.3 Model Specification

14.4 Macroeconomics of the baseline scenario

14.5 Agriculture towards 2050

14.6 Climate Change and its Impacts

14.7 Concluding Thoughts

Acknowledgments

References

Chapter 15. A Global Approach to Energy and the Environment

15.1 Introduction

15.2 Structure of the Model

15.3 Summary of Key Applications and Insights

15.4 Sample Applications

15.5 Conclusion

Acknowledgments

References

Chapter 16. Integrated Economic and Climate Modeling

16.1 Introduction

16.2 Dice and Rice Models as Examples of IAMs

16.3 Illustrative Model Results: The Copenhagen Accord

16.4 Some Major Issues for Research in IAM

16.5 Final Thoughts

Acknowledgments

References

Chapter 17. An Econometric Approach to General Equilibrium Modeling

17.1 Introduction

17.2 Econometric Modeling of Producer Behavior

17.3 Application of the Kalman Filter

17.4 Instrumental Variables and Specification Tests

17.5 Empirical Results on Producer Behavior

17.6 Econometric Modeling of Consumer Behavior

17.7 Data Issues in Modeling Consumer Behavior

17.8 Aggregate Demands for Goods and Leisure

17.9 Intertemporal Allocation of Full Consumption

17.10 Computing Confidence Intervals

17.11 Conclusions

Acknowledgments

References

Chapter 18. Trade Elasticity Parameters for a Computable General Equilibrium Model

18.1 Introduction

18.2 Why do trade elasticities matter?

18.3 Import demand elasticities

18.4 Export supply

18.5 Gravity, trade costs and structural estimation

References

Chapter 19. Validation in Computable General Equilibrium Modeling

19.1 Introduction

19.2 Checking the Code: Homogeneity Tests and Other Checking Simulations

19.3 Validation Through the Gdp Identity

19.4 Validation Through Back-of-The-Envelope (Bote) Analysis and Other Plausibility Checks

19.5 Consistency with History

19.6 Forecasting Performance

19.7 Conclusion

Acknowledgments

References

Chapter 20. Solution Software for Computable General Equilibrium Modeling

20.1 Introduction

20.2 Early Days

20.3 General-Purpose Software

20.4 Levels and Change Solution Methods

20.5 General Features of CGE Models

20.6 Three Representations of a Simple Model

20.7 Curse of Dimensionality

20.8 Checking and Debugging Models

20.9 Comparing Features of Gams and Gempack

20.10 Concluding Remarks

References

Chapter 21. Income Distribution in Computable General Equilibrium Modeling

21.1 Introduction

21.2 Static Distribution Oriented Macro–Micro Models Based on Walrasian CGE

21.3 Static Macro–Micro Distributional Models with Real or Apparent Labor Market Imperfections

21.4 Dynamic Macro–Micro Modeling

21.5 Gidd Model as an Example of a Global Dynamic Macro–Micro Model

21.6 Concluding Remarks

References

Chapter 22. The New Keynesian Approach to Dynamic General Equilibrium Modeling: Models, Methods and Macroeconomic Policy Evaluation

22.1 Introduction

22.2 The New Keynesian Approach to Monetary Economics: A Brief History Of Thought

22.3 Building New Keynesian Models

22.4 Methods for Model Solution and Estimation

22.5 A New Approach to Model Comparison and Policy Evaluation

22.6 Policy Evaluation and Robustness under Model Uncertainty

22.7 Open Questions and Future Research

Acknowledgments

References

Chapter 23. Computing General Equilibrium Theories of Monopolistic Competition and Heterogeneous Firms

23.1 Introduction

23.2 Trade Theories

23.3 General Equilibrium Formulation

23.4 Computation as a Companion to Theory

23.5 Calibration

23.6 Decomposition Strategy for Computation of Large Models

23.7 Applications

23.8 Conclusion

References

Chapter 24. Market Structure in Multisector General Equilibrium Models of Open Economies

24.1 Introduction

24.2 Oligopoly

24.3 Monopolistic Competition

24.4 Model Selection and Validation

24.5 Summary

Note

References

Chapter 25. Computable General Equilibrium Modeling of Market Access in Services

25.1 Introduction

25.2 Definitional and Data Issues

25.3 Conceptual Issues

25.4 Implementation Issues

25.5 Models of Services Liberalization

25.6 Modes of Supply and Sector Specificity

25.7 An Example

25.8 Setting Future Research Priorities

25.9 Conclusions

Acknowledgments

References

Chapter 26. The Labor Market in Computable General Equilibrium Models

26.1 Introduction

26.2 A Classification of Labor-Market Related Questions

26.3 Labor Supply

26.4 Labor Demand

26.5 Labor Market Coordination

26.6 Welfare Analysis

26.7 Conclusions

Acknowledgments

References

Chapter 27. Generational Policy and Aging in Closed and Open Dynamic General Equilibrium Models

27.1 Introduction

27.2 Preliminaries: Modeling of Aging, Retirement and Idiosyncratic Income Risk

27.3 Closed-Economy Model for Germany

27.4 Multiregional world model

27.5 Summary of results

Acknowledgements

References

Index-Volume 1A

Index-Volume 1B