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Dynamic general-equilibrium model of an open economy: A comment

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  • Vellinga, Nico

Abstract

The model developed by Devarajan and Go [Devarajan S., & Go S. (1998). The simplest dynamic general-equilibrium model of an open economy. Journal of Policy Modeling, 20(6), 677-714] presents the simplest possible general-equilibrium model of an open economy in which producers' and consumers' decisions are both intra-and inter-temporally consistent. Unfortunately, there is possible leakage in that imported capital goods are taxed twice, yet these taxes do not show up fully in the government's budget constraint. Additionally, one of the proposed terminal conditions is implied by the other equations because of Walras' Law. Therefore, the model description is lacking an appropriate terminal condition. In this paper an alternative set of equations is presented that removes the possible leakage and has an additional terminal condition with respect to one of the stock variables.

Suggested Citation

  • Vellinga, Nico, 2008. "Dynamic general-equilibrium model of an open economy: A comment," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 993-997.
    • Handle: RePEc:eee:jpolmo:v:30:y:2008:i:6:p:993-997
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    Cited by:

    1. Nico Vellinga, 2018. "Visual Economic Modelling System (VEMS) for Computable General Equilibrium Models," Computational Economics, Springer;Society for Computational Economics, vol. 51(4), pages 1097-1121, April.
    2. Gohin, Alexandre & Rault, Arnaud, 2013. "Assessing the economic costs of a foot and mouth disease outbreak on Brittany: A dynamic computable general equilibrium analysis," Food Policy, Elsevier, vol. 39(C), pages 97-107.

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    Keywords

    Dynamic CGE Open economy;

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