Decomposing Simulation Results with Respect to Exogenous Shocks
When a general equilibrium model is solved, there are often a large number of exogenous shocks. The change in each endogenous variable obviously depends on these different shocks. We point out a natural way of decomposing the changes (or percentage changes) in the endogenous variables as sums of the contributions made by the change in each exogenous variable. The change in any endogenous variable is exactly equal to the sum of the contributions to this change attributed to each of the exogenous variables. The contribution of a group of exogenous variables to the change (or percentage change) in any endogenous variable is defined to be the sum of the contributions of the individual exogenous variables in the group. If all the exogenous variables are partitioned into several groups that are mutually exclusive and exhaustive, the change (or percentage change) in any endogenous variable is just the sum of the contributions made by these groups. We introduce, and motivate, these decompositions in the context of a published GTAP application in which 10 regions remove import tariffs and non-tariff barriers to imports. We use the methods given in this paper to report numerical values for the contributions to the welfare gains of various regions due to tariff reductions by particular regions or groups of regions in this simulation. We show how the values obtained via the decomposition are related to the estimates in the published study of the contributions to welfare gain due to certain groups of tariff reductions. We describe a practical procedure for calculating the contributions of individual exogenous variables or groups of exogenous variables to the changes (or the percentage changes) in all of the endogenous variables. This procedure, which applies to a wide range of general equilibrium models, is now automated in GEMPACK in a version that will be made publicly available in the future. The contributions that make up the decomposition are defined as integrals. As such, they depend on the path by which the exogenous values move from their pre-simulation to post-simulation values. We propose one natural path, namely a straight line between these two points. Along this path, the ordinary rate of change is constant for each variable.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 15 (2000)
Issue (Month): 3 (June)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/economic+theory/journal/10614/PS2|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peter B. Dixon & Maureen T. Rimmer, 1998. "Forecasting and Policy Analysis with a Dynamic CGE Model of Australia," Centre of Policy Studies/IMPACT Centre Working Papers op-90, Victoria University, Centre of Policy Studies/IMPACT Centre.
- W. Jill Harrison & K.R. Pearson, 1994.
"Computing Solutions for Large General Equilibrium Models Using GEMPACK,"
Centre of Policy Studies/IMPACT Centre Working Papers
ip-64, Victoria University, Centre of Policy Studies/IMPACT Centre.
- Harrison, W Jill & Pearson, K R, 1996. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Computational Economics, Springer;Society for Computational Economics, vol. 9(2), pages 83-127, May.
- Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, November.
When requesting a correction, please mention this item's handle: RePEc:kap:compec:v:15:y:2000:i:3:p:227-249. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.