Simulating the U.S. Recession with and without the Obama package: the role of 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 InfoPaper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-193.
Date of creation: Jan 2010
Date of revision:
U S recession CGE modelling excess capacity sticky rents mark-up pricing;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-02-20 (All new papers)
- NEP-CMP-2010-02-20 (Computational Economics)
- NEP-MAC-2010-02-20 (Macroeconomics)
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