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Investment behaviour in transition countries and computable general equilibrium models


  • Daniel Piazolo


When applying Computable General Equilibrium (CGE) models to transition economies, it is not plausible to use the standard assumption that the base year data represent stable structural characteristics or even the steady state of the economy. The suggestions forwarded until now to overcome this problem are discussed in this article. An amendment is proposed by modifying the investment modelling within the dynamic CGE setting. The standard formulation of installation costs for capital is extended through the inclusion of adjustment costs that depend on the change of the investment level. Such formulation of the adjustment costs within the dynamic CGE model leads to an investment behaviour that mirrors the empirical data of the first years of the transition.

Suggested Citation

  • Daniel Piazolo, 2001. "Investment behaviour in transition countries and computable general equilibrium models," Applied Economics, Taylor & Francis Journals, vol. 33(7), pages 829-837.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:7:p:829-837
    DOI: 10.1080/00036840121922

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    References listed on IDEAS

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    6. Banerjee, Anindya & Dolado, Juan J. & Galbraith, John W. & Hendry, David, 1993. "Co-integration, Error Correction, and the Econometric Analysis of Non-Stationary Data," OUP Catalogue, Oxford University Press, number 9780198288107.
    7. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Cited by:

    1. Scrieciu, S. Serban, 2007. "The inherent dangers of using computable general equilibrium models as a single integrated modelling framework for sustainability impact assessment. A critical note on Bohringer and Loschel (2006)," Ecological Economics, Elsevier, vol. 60(4), pages 678-684, February.
    2. Keshab Bhattarai, 2016. "Growth and Income Distributions in Four EU Economies," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(3), pages 263-277, August.
    3. Chun-Chu Liu, 2006. "A computable general equilibrium model of the southern region of Taiwan: the impact of the Tainan science-based industrial park," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1655-1661.
    4. Keshab Raj BHATTARAI, "undated". "Dynamic Multi-Household General Economic Models for Policy Simulations: France, Germany, Spain and UK," EcoMod2009 21500014, EcoMod.
    5. Bor, Yungchang Jeffery & Chuang, Yih-Chyi & Lai, Wei-Wen & Yang, Chung-Min, 2010. "A dynamic general equilibrium model for public R&D investment in Taiwan," Economic Modelling, Elsevier, vol. 27(1), pages 171-183, January.

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