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Long Run Simulations With GTAP: Illustrative Results from APEC Trade Liberalisation

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  • Walmsley, Terrie

Abstract

1998, March In static applied general equilibrium models, the exogenous/endogenous split between variables (or closure) is used to infer the time frame over which the effects of a shock are simulated. This paper introduces a long-run closure for the GTAP Model (Hertel and Tsigas, 1997) and uses this closure to simulate and compare the short-run and long-run effects of Asia-Pacific trade liberalisation. The approach explored here incorporates some relatively minor changes to existing GTAP theory in order to define a steady state in which growth rates of all real variables are uniform. Such uniformity must apply in the initial database (as well as in the post-shock solution). So to implement the new long run in GTAP a new initial database must first be created. Details concerning the creation of the new database are given, and results under the new approach are compared with those obtained under the old. The emphasis of this paper is on the development of a long-run closure in which the percentage change form equations of the model and the relationships between the levels variables in the GTAP Data Base are consistent. Further research is required into these types of long-run closures to incorporate changes in ownership of capital to ensure that changes in welfare are adequately modelled. In the results reported here, GDP is not a useful guide to national welfare. The long-run closures introduced here are also compared with another comparative static long-run closure developed for GTAP by Francois, MacDonald and Nordström (1996). Technical Paper Number 9 can be downloaded in PDF format. To print this you will need the Adobe Acrobat Reader. For those interested in replicating the results in this technical paper, an associated zip file can be downloaded. The zip file includes a readme file with detailed instructions.

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  • Walmsley, Terrie, 1998. "Long Run Simulations With GTAP: Illustrative Results from APEC Trade Liberalisation," GTAP Technical Papers 312, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    • Handle: RePEc:gta:techpp:312
    Note: GTAP Technical Paper No. 09
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Philip D. Adams & Karen M. Huff & Robert McDougall & K.R. Pearson & Alan A. Powell, 1996. "Medium- and Long-run Consequences for Australia of an APEC Free Trade Area: CGE Analyses using the GTAP and MONASH Models," Centre of Policy Studies/IMPACT Centre Working Papers g-111, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    5. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    6. Hertel, Thomas & Arndt, Channing, 1997. "China in 2005: Implications for the Rest of the World," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 12, pages 505-547.
    7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Kolasa, Marcin, 2014. "Real convergence and its illusions," Economic Modelling, Elsevier, vol. 37(C), pages 79-88.
    2. Widodo, Tri & Fitrady, Ardyanto & Alim Rosyadi, Saiful & Erdyas Bimanatya, Traheka, 2018. "A Long-Run Estimation of Natural Gas Demand in Indonesian Manufacturing Sector: Computable General Equilibrium Model Approach," MPRA Paper 86887, University Library of Munich, Germany.
    3. De Miguel, Carlos J. & Durán Lima, José Elías & Schuschny, Andrés Ricardo, 2007. "Trade agreements by Colombia, Ecuador and Peru with the United States: effects on trade, production and welfare," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    4. Robert Scollay & John Gilbert, 2001. "An Integrated Approach To Agricultural Tradeand Development Issues:Exploring The Welfare And Distribution Issues," UNCTAD Blue Series Papers 11, United Nations Conference on Trade and Development.
    5. Boyer, Ivan & Schuschny, Andrés Ricardo, 2010. "Quantitative assessment of a free trade agreement between MERCOSUR and the European Union," Estudios Estadísticos 4774, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    6. De Miguel, Carlos J. & Durán Lima, José Elías & Schuschny, Andrés Ricardo, 2007. "Los acuerdos comerciales de Colombia, Ecuador y Perú con los Estados Unidos: efectos sobre el comercio, la producción y el bienestar," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    7. Chunding Li & John Whalley & Chuantian He & Chuangwei Lin, 2021. "The 2008 Financial Crisis and the Lack of Retaliatory Trade Intervention," CESifo Economic Studies, CESifo Group, vol. 67(1), pages 78-105.
    8. McDonald, Scott & Walmsley, Terrie, 2001. "Bilateral Free Trade Agreements and Customs Unions: The Impact of the EU South Africa Free Trade Agreement on Botswana," Conference papers 330940, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    9. Khan, Aamir & Walmsley, Terrie & Mukhopadhyay, Kakali, 2019. "Trade Liberalization and Income Inequality: The Case for Pakistan," Conference papers 333125, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Khan, Muhammad Aamir & Walmsley, Terrie & Mukhopadhyay, Kakali, 2021. "Trade liberalization and income inequality: The case for Pakistan," Journal of Asian Economics, Elsevier, vol. 74(C).
    11. Biyik, Onur, 2021. "Japan-AfCFTA Integration Through Economic Impacts of Alternative EPA Scenarios: Examination of the GTAP 10A MRIO Database," Conference papers 333265, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    12. Minor, Peter & Mureverwi, Brian, 2013. "A Household Level Analysis of African Trade Liberalization: The Case of Mozambique," Conference papers 332308, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    13. Terrie L. Walmsley, 1999. "Incorporating International Capital Ownership into the GTAP Model: Results for Asia-Pacific Trade Liberalisation," Centre of Policy Studies/IMPACT Centre Working Papers ip-72, Victoria University, Centre of Policy Studies/IMPACT Centre.
    14. Jong Eun Lee, 2004. "The sequential issue in free trade areas: Policy implication for Korea," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 165-174.
    15. Tomoyoshi Nakajima, 2002. "An Analysis of the Economic Effects of Japan-Korea FTA: Sectoral Aspects," Discussion papers 0202e, ERINA - Economic Research Institute for Northeast Asia.
    16. Oktaviani, Rina & Sugema, Iman & Ratnawaty, Anny, 2003. "Bank Restructuring and its Implication on Indonesian Macro Economy and Agricultural Sector," 2003 Conference (47th), February 12-14, 2003, Fremantle, Australia 58194, Australian Agricultural and Resource Economics Society.

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    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F15 - International Economics - - Trade - - - Economic Integration

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