Textbook of Computable General Equilibrium Modeling Programming and Simulations
by Hosoe, Nobuhiro; Gasawa, Kenji; Hashimoto, HideoFormat: Hardcover
Pub. Date: 2010-08-15
Publisher(s): Palgrave Macmillan
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Summary
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.
Author Biography
NOBUHIRO HOSOE earned a Ph.D. in Economics at Osaka University and has been an associate professor at Japan's National Graduate Institute for Policy Studies since 1999. He has developed computable general equilibrium models and other simulation models to empirically investigate impacts of trade liberalization and regulatory reforms in public utilities.
KENJI GASAWA has been a researcher at Research Institute, National Rehabilitation Center for Persons with Disabilities since 2001. He has analyzed the effects of social security expenditures on social welfare using computable general equilibrium models and other simulation models.
HIDEO HASHIMOTO is Professor Emeritus of Osaka University, and has been engaged in economic analysis of developing countries at the World Bank for more than ten years, using various macroeconomic models. He has also taught development economics at Osaka University.
KENJI GASAWA has been a researcher at Research Institute, National Rehabilitation Center for Persons with Disabilities since 2001. He has analyzed the effects of social security expenditures on social welfare using computable general equilibrium models and other simulation models.
HIDEO HASHIMOTO is Professor Emeritus of Osaka University, and has been engaged in economic analysis of developing countries at the World Bank for more than ten years, using various macroeconomic models. He has also taught development economics at Osaka University.
Table of Contents
| Abbreviations | p. x |
| Symbols in CGE Models | p. xii |
| Tables, Figures and Lists | p. xv |
| Preface | p. xviii |
| Overview | p. 1 |
| Economic analysis with computable general equilibrium models | p. 1 |
| Framework of CGE models | p. 3 |
| Advantages and shortcomings of CGE models | p. 5 |
| Applications of CGE models | p. 6 |
| Aims of this book | p. 6 |
| Software and simulations on the PC | p. 8 |
| Structure of this textbook | p. 10 |
| The Simple CGE Model | p. 13 |
| Setup of the economy | p. 14 |
| Household behaviour | p. 15 |
| Firm behaviour | p. 16 |
| Market-clearing conditions | p. 18 |
| Model system | p. 19 |
| Computation | p. 23 |
| Example: the 'household utility maximization model' | p. 23 |
| Formulation of the model | p. 24 |
| Specifying coefficients and exogenous variables | p. 25 |
| Computational procedures | p. 25 |
| Preparing input files | p. 27 |
| Structure of input files and general syntax of GAMS | p. 27 |
| Directives | p. 29 |
| Results of computation in the output file | p. 36 |
| The Social Accounting Matrix | p. 41 |
| Structure of social accounting matrix | p. 42 |
| Social accounting matrix for the simple CGE model | p. 42 |
| SAM for the standard CGE model | p. 44 |
| Construction of social accounting matrix | p. 47 |
| Example: Social accounting matrix for Japan | p. 50 |
| Consistency among various databases and matrix adjustment for a SAM | p. 56 |
| Calibration and Computational Strategy for General Equilibrium | p. 61 |
| The basic concept of calibration | p. 61 |
| Value, price and quantity | p. 63 |
| Calibration procedure - mathematical manipulation | p. 64 |
| The case without indirect taxes | p. 64 |
| The case with indirect taxes | p. 69 |
| GAMS programming | p. 70 |
| Programming procedures and an input file | p. 70 |
| Declaration and definition of sets | p. 73 |
| Installation of the SAM | p. 74 |
| Retrieval of data from the SAM | p. 75 |
| Calibration | p. 76 |
| Specifying and solving the CGE model | p. 78 |
| Initial values for numerical computation | p. 78 |
| Uses of lower bounds | p. 79 |
| Choice of numeraire | p. 80 |
| Solution of the simple CGE model | p. 80 |
| The Standard CGE Model | p. 87 |
| Overview of the standard CGE model | p. 87 |
| Intermediate inputs | p. 89 |
| Government | p. 92 |
| Investment and savings | p. 93 |
| Introduction of investment and savings | p. 93 |
| Modification of household and government behaviour | p. 95 |
| International trade | p. 96 |
| Small-country assumption and balance of payments | p. 96 |
| Armington's assumption | p. 97 |
| Substitution between imports and domestic goods | p. 98 |
| Transformation between exports and domestic goods | p. 99 |
| Market-clearing conditions | p. 102 |
| Model system | p. 103 |
| GAMS programming | p. 106 |
| Declaration of sets, installation of the SAM and derivation of the initial equilibrium values | p. 112 |
| Calibration | p. 114 |
| Model solution | p. 118 |
| Macro Closure | p. 122 |
| Investment and savings-macro closure in a closed economy model | p. 123 |
| Current account balance-macro closure in an open economy model | p. 125 |
| Other closure rules | p. 127 |
| Simulating General Equilibria | p. 128 |
| Multiple runs in one input file | p. 129 |
| Computation of indicators from solved values | p. 131 |
| Measurement of economic welfare | p. 133 |
| Sensitivity analysis | p. 137 |
| The concept of sensitivity analysis | p. 137 |
| Example of sensitivity analysis with the standard CGE model | p. 138 |
| Sensitivity analysis with a three-sector model | p. 139 |
| Interpretation of Simulation Results | p. 144 |
| One-sector model | p. 145 |
| A small open economy | p. 145 |
| Impact of import tariffs | p. 149 |
| Impact of transfers from abroad | p. 151 |
| Impact of terms of trade shock | p. 152 |
| Two-sector model | p. 153 |
| Model Extension | p. 158 |
| Multihousehold model | p. 158 |
| Large-country model | p. 161 |
| World trade model | p. 167 |
| Two-country model | p. 167 |
| Multicountry model | p. 174 |
| Imperfect competition model | p. 176 |
| Monopoly model | p. 176 |
| Oligopoly model | p. 182 |
| Quantitative restrictions | p. 182 |
| Increasing-returns-to-scale model | p. 187 |
| Concluding Remarks | p. 191 |
| Extensions inside the CGE models | p. 191 |
| Extensions outside the CGE models | p. 192 |
| Concluding remarks for better CGE modelling | p. 193 |
| Derivation of Household Demand Functions | p. 195 |
| Competitive Equilibrium vs Social Optimum | p. 196 |
| Utility Maximization and Lagrange Multipliers | p. 199 |
| Reformulation of a System of Simultaneous Equations into an Optimization Problem | p. 200 |
| Leontief-type Function and Optimization | p. 202 |
| Advanced Uses of GAMS | p. 204 |
| Set | p. 204 |
| Sequence in a set | p. 204 |
| Alias of a set | p. 204 |
| Subset | p. 205 |
| Setting values with formula | p. 205 |
| Large Table data input | p. 206 |
| Output file | p. 207 |
| Printing variables and constants | p. 207 |
| Suppressing output | p. 208 |
| Communicating with spreadsheet software | p. 208 |
| Transfer of data in an input file into a spreadsheet | p. 209 |
| Transfer of data from a spreadsheet into a GDX file | p. 211 |
| How to Cope with Errors and Infeasibilities | p. 213 |
| Case 1: Compilation error | p. 213 |
| Case 2: Execution error and Case 3: Solve error | p. 216 |
| Case 4a: No base run equilibrium solution | p. 220 |
| Case 4b: No counterfactual equilibrium solution | p. 221 |
| Case 5: Incorrect solution | p. 222 |
| Capacity limitation of GAMS | p. 222 |
| Web Resources | p. 224 |
| References | p. 226 |
| Index | p. 229 |
| GAMS Index | p. 234 |
| Table of Contents provided by Ingram. All Rights Reserved. |
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