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Climate policy and trade: Dynamics and the steady-state assumption in a multi-regional framework

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  • Springer, Katrin

Abstract

Most dynamic trade models assume steady state or balanced growth. This paper argues while this can be done in a single region model or a model without trade, the steady state assumption is problematic in a multi-regional setting with trade interactions. This paper shows the consequences of assuming a balanced growth path and discusses several problems which are connected to the calibration of recursive dynamic multi-regional trade models. Furthermore, it is demonstrated how different dynamic specifications of the base run path affect the results of a policy scenario by imposing the Kyoto Protocol. The simulations illustrate that a balanced growth path can not be maintained in a multi-regional trade model due to international trade spill-overs. It is shown that the model results and thus the assessment of climate policy options depend substantially on the dynamic specification.

Suggested Citation

  • Springer, Katrin, 1999. "Climate policy and trade: Dynamics and the steady-state assumption in a multi-regional framework," Kiel Working Papers 952, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:952
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    References listed on IDEAS

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    Cited by:

    1. Haqiqi , Iman & Bahalou Horeh , Marziyeh, 2013. "Macroeconomic Impacts of Export Barriers in a Dynamic CGE Model," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 8(3), pages 117-150, July.
    2. Farmer, Karl & Wendner, Ronald, 2004. "Dynamic multi-sector CGE modeling and the specification of capital," Structural Change and Economic Dynamics, Elsevier, vol. 15(4), pages 469-492, December.
    3. Kuster, Robert & Ellersdorfer, Ingo & Fahl, Ulrich, 2007. "A CGE-Analysis of Energy Policies Considering Labor Market Imperfections and Technology Specifications," Climate Change Modelling and Policy Working Papers 12035, Fondazione Eni Enrico Mattei (FEEM).
    4. Robert Küster & ingo Ellersdorfer & Ulrich Fahl, 2007. "A CGE-Analysis of Energy Policies Considering Labor Market Imperfections and Technology Specifications," Working Papers 2007.7, Fondazione Eni Enrico Mattei.
    5. Klepper, Gernot & Peterson, Sonja & Springer, Katrin, 2003. "DART97: a description of the multi-regional, multi-sectoral trade model for the analysis of climate policies," Kiel Working Papers 1149, Kiel Institute for the World Economy (IfW Kiel).

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    More about this item

    Keywords

    Growth of open economies; Steady-state; Multi-regional dynamic CGE Model; International environmental problems;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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