Textbook of Computable General Equilibrium Modelling: Programming and Simulations

255 Pages·2010·3.796 MB·English

by  Nobuhiro Hosoe, Kenji Gasawa, Hideo Hashimoto (auth.)

Textbook of Computable General Equilibrium Modelling
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Textbook of Computable
General Equilibrium
Modelling
Programming and Simulations
Nobuhiro Hosoe
Kenji Gasawa
and
Hideo Hashimoto
©NobuhiroHosoe,KenjiGasawaandHideoHashimoto2010
Softcover reprint of the hardcover 1st edition 2010 978-0-230-24814-4
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Firstpublished2010by
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ISBN 978-1-349-32039-4 ISBN 978-0-230-28165-3 (eBook)
DOI 10.1057/9780230281653
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LibraryofCongressCataloging-in-PublicationData
Hosoe,Nobuhiro,1972–
Textbookofcomputablegeneralequilibriummodelling:programmingand
simulations/NobuhiroHosoe,KenjiGasawaandHideoHashimoto.
p.cm.
ISBN978-1-349-32039-4
1. Equilibrium(Economics)—Mathematicalmodels. I. Gasawa,Kenji,
1971– II. Hashimoto,Hideo,1937– III. Title.
HB145.H6772010
339.5—dc22
2010010811
10 9 8 7 6 5 4 3 2 1
19 18 17 16 15 14 13 12 11 10
Contents
Abbreviations x
SymbolsinCGEModels xii
Tables,FiguresandLists xv
Preface xviii
1 Overview 1
1.1 Economicanalysiswithcomputablegeneral
equilibriummodels 1
1.2 FrameworkofCGEmodels 3
1.3 AdvantagesandshortcomingsofCGEmodels 5
1.4 ApplicationsofCGEmodels 6
1.5 Aimsofthisbook 6
1.6 SoftwareandsimulationsonthePC 8
1.7 Structureofthistextbook 10
2 TheSimpleCGEModel 13
2.1 Setupoftheeconomy 14
2.2 Householdbehaviour 15
2.3 Firmbehaviour 16
2.4 Market-clearingconditions 18
2.5 Modelsystem 19
3 Computation 23
3.1 Example:the‘householdutilitymaximizationmodel’ 23
3.1.1 Formulationofthemodel 24
3.1.2 Specifyingcoefficientsandexogenousvariables 25
3.2 Computationalprocedures 25
3.3 Preparinginputfiles 27
3.3.1 StructureofinputfilesandgeneralsyntaxofGAMS 27
3.3.2 Directives 29
3.4 Resultsofcomputationintheoutputfile 36
v
vi Contents
4 TheSocialAccountingMatrix 41
4.1 Structureofsocialaccountingmatrix 42
4.1.1 SocialaccountingmatrixforthesimpleCGEmodel 42
4.1.2 SAMforthestandardCGEmodel 44
4.2 Constructionofsocialaccountingmatrix 47
4.3 Example:SocialaccountingmatrixforJapan 50
4.4 Consistencyamongvariousdatabasesandmatrix
adjustmentforaSAM 56
5 CalibrationandComputationalStrategyfor
GeneralEquilibrium 61
5.1 Thebasicconceptofcalibration 61
5.2 Value,priceandquantity 63
5.3 Calibrationprocedure–mathematicalmanipulation 64
5.3.1 Thecasewithoutindirecttaxes 64
5.3.2 Thecasewithindirecttaxes 69
5.4 GAMSprogramming 70
5.4.1 Programmingproceduresandaninputfile 70
5.4.2 Declarationanddefinitionofsets 73
5.4.3 InstallationoftheSAM 74
5.4.4 RetrievalofdatafromtheSAM 75
5.4.5 Calibration 76
5.4.6 SpecifyingandsolvingtheCGEmodel 78
5.4.7 Initialvaluesfornumericalcomputation 78
5.4.8 Usesoflowerbounds 79
5.4.9 Choiceofnumeraire 80
5.5 SolutionofthesimpleCGEmodel 80
6 TheStandardCGEModel 87
6.1 OverviewofthestandardCGEmodel 87
6.2 Intermediateinputs 89
6.3 Government 92
6.4 Investmentandsavings 93
6.4.1 Introductionofinvestmentandsavings 93
6.4.2 Modificationofhouseholdandgovernment
behaviour 95
Contents vii
6.5 Internationaltrade 96
6.5.1 Small-countryassumptionandbalanceofpayments 96
6.5.2 Armington’sassumption 97
6.5.3 Substitutionbetweenimportsanddomesticgoods 98
6.5.4 Transformationbetweenexportsand
domesticgoods 99
6.6 Market-clearingconditions 102
6.7 Modelsystem 103
6.8 GAMSprogramming 106
6.8.1 Declarationofsets,installationoftheSAMand
derivationoftheinitialequilibriumvalues 112
6.8.2 Calibration 114
6.8.3 Modelsolution 118
7 MacroClosure 122
7.1 Investmentandsavings–macroclosureinaclosed
economymodel 123
7.2 Currentaccountbalance–macroclosureinanopen
economymodel 125
7.3 Otherclosurerules 127
8 SimulatingGeneralEquilibria 128
8.1 Multiplerunsinoneinputfile 129
8.2 Computationofindicatorsfromsolvedvalues 131
8.3 Measurementofeconomicwelfare 133
8.4 Sensitivityanalysis 137
8.4.1 Theconceptofsensitivityanalysis 137
8.4.2 Exampleofsensitivityanalysiswiththestandard
CGEmodel 138
8.4.3 Sensitivityanalysiswithathree-sectormodel 139
9 InterpretationofSimulationResults 144
9.1 One-sectormodel 145
9.1.1 Asmallopeneconomy 145
9.1.2 Impactofimporttariffs 149
viii Contents
9.1.3 Impactoftransfersfromabroad 151
9.1.4 Impactoftermsoftradeshock 152
9.2 Two-sectormodel 153
10 ModelExtension 158
10.1 Multihouseholdmodel 158
10.2 Large-countrymodel 161
10.3 Worldtrademodel 167
10.3.1 Two-countrymodel 167
10.3.2 Multicountrymodel 174
10.4 Imperfectcompetitionmodel 176
10.4.1 Monopolymodel 176
10.4.2 Oligopolymodel 182
10.5 Quantitativerestrictions 182
10.6 Increasing-returns-to-scalemodel 187
11 ConcludingRemarks 191
11.1 ExtensionsinsidetheCGEmodels 191
11.2 ExtensionsoutsidetheCGEmodels 192
11.3 ConcludingremarksforbetterCGEmodelling 193
AppendixI:DerivationofHouseholdDemandFunctions 195
AppendixII:CompetitiveEquilibriumvsSocialOptimum 196
AppendixIII:UtilityMaximizationandLagrangeMultipliers 199
AppendixIV:ReformulationofaSystemofSimultaneous
EquationsintoanOptimizationProblem 200
AppendixV:Leontief-typeFunctionandOptimization 202
AnnexA:AdvancedUsesofGAMS 204
A.1 Set 204
A.1.1 Sequenceinaset 204
A.1.2 Aliasofaset 204
A.1.3 Subset 205
A.2 Settingvalueswithformula 205
A.3 LargeTabledatainput 206
Contents ix
A.4 Outputfile 207
A.4.1 Printingvariablesandconstants 207
A.4.2 Suppressingoutput 208
A.5 Communicatingwithspreadsheetsoftware 208
A.5.1 Transferofdatainaninputfileintoaspreadsheet 209
A.5.2 TransferofdatafromaspreadsheetintoaGDXfile 211
AnnexB:HowtoCopewithErrorsandInfeasibilities 213
B.1 Case1:Compilationerror 213
B.2 Case2:ExecutionerrorandCase3:Solveerror 216
B.3 Case4a:Nobaserunequilibriumsolution 220
B.4 Case4b:Nocounterfactualequilibriumsolution 221
B.5 Case5:Incorrectsolution 222
B.6 CapacitylimitationofGAMS 222
AnnexC:WebResources 224
References 226
Index 229
GAMSIndex 234