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Macro Closure

In: Textbook of Computable General Equilibrium Modelling

Author

Listed:
  • Nobuhiro Hosoe
  • Kenji Gasawa
  • Hideo Hashimoto

Abstract

Any empirical model depicts only part of the real economy; thus, it has a borderline distinguishing between the ‘inside’ of the model, which is represented by endogenous variables, and the ‘outside’, which is assumed to be given. In the ‘simple CGE model’ developed in Chapter 2, the supply of primary factors is assumed to be exogenously constrained by their endowments FF h . Instead, their supply can be endogenized with a factor supply function. For example, we can incorporate consumption of time as leisure in the household utility function to generate voluntary unemployment or an inflow of foreign labour. In principle, we can freely set a borderline delineating the endogenous part from the exogenous part of the model, considering the purpose of the analysis with insights into the actual economic phenomena.

Suggested Citation

  • Nobuhiro Hosoe & Kenji Gasawa & Hideo Hashimoto, 2010. "Macro Closure," Palgrave Macmillan Books, in: Textbook of Computable General Equilibrium Modelling, chapter 7, pages 122-127, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-28165-3_7
    DOI: 10.1057/9780230281653_7
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    Cited by:

    1. Hartley-Ballestero, Rocío, 2021. "Diferentes perspectivas sobre teoría económica," Revista de Ciencias Económicas, Instituto de Investigaciones en Ciencias Económicas, Universidad de Costa Rica, vol. 39(1), December.

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