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Solving a Large-Scale Intertemporal Applied General Equilibrium Model

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  • Michael Malakellis

Abstract

Intertemporal Computable General Equilibrium (CGE) models have the potential to quantify the implications of sectoral and temporal linkages which are often crucial for understanding the effects of economic shocks. However, such models will prove to be of practical use for policy analysis only if accurate solutions can be obtained at reasonable cost. Often, the usefulness of intertemporal CGE models for policy analysis is diminished because the degree of economic detail incorporated is compromised in order to maintain computational tractability. The purpose of this paper is to describe how Euler's method may be used to solve large-scale intertemporal CGE models without compromising significantly on the type and degree of economic detail modelled. In particular, there is no need to restrict the number of costate variables (e.g., by assuming that capital stocks are homogeneous) nor to assume that the solution will always be interior.

Suggested Citation

  • Michael Malakellis, 1992. "Solving a Large-Scale Intertemporal Applied General Equilibrium Model," Centre of Policy Studies/IMPACT Centre Working Papers op-74, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:op-74
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    References listed on IDEAS

    as
    1. K.R. Pearson, 1991. "Solving Nonlinear Economic Models Accurately Via a Linear Representation," Centre of Policy Studies/IMPACT Centre Working Papers ip-55, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. Pearson, K. R., 1988. "Automating the computation of solutions of large economic models," Economic Modelling, Elsevier, vol. 5(4), pages 385-395, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing

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