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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

Overview of Dynamic GTAP Model

Terrie L. Walmsley

Model by: Elena Ianchovichina and Robert A. McDougall

the dynamic gtap model
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

disequilibrium approach
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

investment theory
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

developing a common baseline

Developing a Common Baseline

Terrie L. Walmsley

and Robert A. McDougall

last year s meeting
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

a base case scenario
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

macro data
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

slide9

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

labor
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

policy
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

policy shocks
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

policy shocks1
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

policy shocks2
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

policy shocks3
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

slide20

Macro

GDP

POP

GDI

Unskilled Labor

Skilled Labor

Capital

Aggregate to GTAP Regions

slide21

Macro

GDP

POP

GDI

Unskilled Labor

Adjusted URTV

Skilled Labor

Capital

Policy

Aggregate to GTAP Regions

slide22

Macro

GDP

POP

GDI

Unskilled Labor

Adjusted URTV

Skilled Labor

Capital

Policy

Aggregate to GTAP Regions

Aggregation Program

what now
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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