You can't have a CGE recession without excess capacity
AbstractSimulations with dynamic, single country, CGE models typically imply that reductions in domestic demand, e.g. a cut in investment, generate increases in exports and reductions in imports facilitated by real depreciation. However, currently in the U.S. a large reduction in investment is occurring simultaneously with a contraction in exports and little movement in the real exchange rate. We show that to describe this situation it is necessary to drop the standard CGE assumption that capital is always fully employed in every industry. After introducing an excess capacity specification, we simulate the U.S. recession with and without the Obama stimulus package.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 28 (2011)
Issue (Month): 1 ()
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Web page: http://www.elsevier.com/locate/inca/30411
U.S. recession; CGE modelling; Excess capacity; Sticky rents; Mark-up pricing;
Other versions of this item:
- Dixon, Peter B. & Rimmer, Maureen T., 2011. "You can't have a CGE recession without excess capacity," Economic Modelling, Elsevier, vol. 28(1-2), pages 602-613, January.
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
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- Peter B. Dixon & Maureen T. Rimmer, 2011. "Doubling U.S. Exports under the President's National Export Initiative: Is it realistic? Is it desirable?," Centre of Policy Studies/IMPACT Centre Working Papers g-220, Monash University, Centre of Policy Studies/IMPACT Centre.
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