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Overview of Dynamic GTAP Model

Overview of Dynamic GTAP Model. Terrie L. Walmsley Model by: Elena Ianchovichina and Robert A. McDougall. The Dynamic GTAP Model. Based on standard GTAP Model. Recursive Dynamic Accumulation of Capital stocks. Foreign Capital Ownership. Disequilibrium theory of Investment.

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Overview of Dynamic GTAP Model

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  1. Overview of Dynamic GTAP Model Terrie L. Walmsley Model by: Elena Ianchovichina and Robert A. McDougall

  2. The Dynamic GTAP Model • Based on standard GTAP Model. • Recursive Dynamic • Accumulation of Capital stocks. • Foreign Capital Ownership. • Disequilibrium theory of Investment. Center for Global Trade Analysis, Purdue University

  3. Disequilibrium Approach • Equalisation of rates of return over time. • Problem 1: Implies Perfect Capital Mobility. • Gradual equalisation of rates of return. • Perfect Capital Mobility in long-run only. • Problem 2: Theory and Data - Inconsistent. • Errors in expectations Center for Global Trade Analysis, Purdue University

  4. Investment Theory • 1. Reduction of errors in expectations - expected rate of return moves towards actual rate of return. • 2. Gradual movement of rates of return to equality over time. • 3. Gradual equalisation of growth rates over time to a steady-state rate. This is required to keep rates of return constant. Center for Global Trade Analysis, Purdue University

  5. Developing a Common Baseline Terrie L. Walmsley and Robert A. McDougall

  6. Last Year’s Meeting • 1. Many GTAP users are doing Dynamic modeling and need a baseline scenario • 2. Country Level (Not GTAP regions). • 3. Sharing of data • 4. 1990 to 2050. (2100? or pre 1990) • 5. GDP, POP, Consumption, Labor, Skilled and Unskilled, Investment, Capital, Protection, Technology, Energy, Savings. Center for Global Trade Analysis, Purdue University

  7. A Base Case Scenario • 1. Period: 1995 to 2020. • 2. Macro: GDP, population, Labor, Skilled and Unskilled labor, Investment, Capital - 202 Countries. • 3. Policy: Uruguay Round, Agreement on Textiles and Clothing, China’s Accession, Post-UR tariff reductions - GTAP regions. Center for Global Trade Analysis, Purdue University

  8. Macro Data • GDP, Investment and Population • Yearly, 1992 - 2007, 133 countries, WB. • Total Labor • 5-yearly, 1990 - 2020, 205 countries, WB. • Skilled Labor • 5-yearly, 1990 - 2020, 71 developing A&F. • Single growth rate, 25 developed, WB. Center for Global Trade Analysis, Purdue University

  9. Macro • Fill-in missing countries • Extrapolate to fill-in missing years • Yearly growth rates for 202 countries (1995-2020) • Aggregate to GTAP regions. Macro GDP POP GDI Unskilled Labor Skilled Labor Capital Aggregate to GTAP Regions Center for Global Trade Analysis, Purdue University

  10. Center for Global Trade Analysis, Purdue University

  11. Center for Global Trade Analysis, Purdue University

  12. Center for Global Trade Analysis, Purdue University

  13. Center for Global Trade Analysis, Purdue University

  14. Labor • Unskilled labor - Currently use growth in total labor. • Using difference between total and skilled labor causes problems - Developed countries. Center for Global Trade Analysis, Purdue University

  15. Policy • Uruguay Round - Francois and Strutt • ATC phase-out (tax equivalents) – GTAP • China’s pre-WTO tariff cuts - Fan and Zheng • China’s WTO accession - Martin • Taiwan - Av mnfcs tariffs reduced to 4% • Post-UR - tariffs reduced to zero over 20 years Center for Global Trade Analysis, Purdue University

  16. Policy Shocks UR and ATC Agreement (excluding China and Taiwan) Post-UR Trade Liberalization 1995 2000 2005 2010 2015 2020 China’s (Taiwan) WTO Accession China’s pre-WTO trade lib Center for Global Trade Analysis, Purdue University

  17. Policy Shocks UR and ATC Agreement (excluding China and Taiwan) Post-UR Trade Liberalization 1995 2000 2005 2010 2015 2020 China’s (Taiwan) WTO Accession China’s pre-WTO trade lib Center for Global Trade Analysis, Purdue University

  18. Policy Shocks UR and ATC Agreement (excluding China and Taiwan) Post-UR Trade Liberalization 1995 2000 2005 2010 2015 2020 China’s (Taiwan) WTO Accession China’s pre-WTO trade lib Center for Global Trade Analysis, Purdue University

  19. Policy Shocks • Policies are implemented so that the change is the same each year. • Further work on ATC - need to be back loaded. • Elimination of quotas is treated as a reduction in export tax equivalents. Center for Global Trade Analysis, Purdue University

  20. Macro GDP POP GDI Unskilled Labor Skilled Labor Capital Aggregate to GTAP Regions

  21. Macro GDP POP GDI Unskilled Labor Adjusted URTV Skilled Labor Capital Policy Aggregate to GTAP Regions

  22. Macro GDP POP GDI Unskilled Labor Adjusted URTV Skilled Labor Capital Policy Aggregate to GTAP Regions Aggregation Program

  23. What Now? • Labor • ATC - back load • New forecasts of macro variables. • Technological change. • Calibrate • Growth Accounting Center for Global Trade Analysis, Purdue University

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