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Modeling Country Risk and Capital Flows in GTAP

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  • Malcolm, Gerard

Abstract

This paper describes how the standard GTAP framework may be used to assess the short-run impacts of changes in international capital market conditions. It describes a technique that can be used to examine the short-run effects of changes in country risk. In the standard GTAP Model investment demand is spread across regions according to a simple rate-of-return-equalizing rule. By making the risk premium in this rule explicit, we are able to examine the effects of changes in these risk premium. This work was originally developed as part of the course material for the South African GTAP short course in January 1998. South Africa has experienced a series of dramatic changes during the last decade, and these have had very significant effects on the capital account. Thus, this paper also contains an application of the technique developed to the recent South African experience, and an assessment of how well the simulated changes in this application match actual outcomes. Technical Paper Number 13 can be downloaded in PDF format. To print this you will need the Adobe Acrobat Reader. Replication of the results in this technical paper may be readily accomplished using the latest version of the RunGTAP software. For those interested in further analysis of the implications of the capital inflow for the South African economy, as well as for the rest of Southern Africa, please download this file in MS Word format.

Suggested Citation

  • Malcolm, Gerard, 1998. "Modeling Country Risk and Capital Flows in GTAP," GTAP Technical Papers 316, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    • Handle: RePEc:gta:techpp:316
    Note: GTAP Technical Paper No. 13
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    File URL: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=316
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    Cited by:

    1. Hertel, Thomas, 2013. "Global Applied General Equilibrium Analysis Using the Global Trade Analysis Project Framework," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 815-876, Elsevier.
    2. Andrista, Safira & Widodo, Tri, 2017. "Welfare Impact of ASEAN Economic Integration: “ASEAN Way” Versus Theory," MPRA Paper 80880, University Library of Munich, Germany.
    3. Ferrari, Emanuele & Boysen, Ole & Nechifor, Victor & Simola, Antti & Boulanger, Pierre H, 2021. "The food security dimension of the African Continental Free Trade Area (AfCFTA)," Conference papers 330218, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Pratt, Stephen & Blake, Adam & Swann, Peter, 2013. "Dynamic general equilibrium model with uncertainty: Uncertainty regarding the future path of the economy," Economic Modelling, Elsevier, vol. 32(C), pages 429-439.
    5. Simola, Antti & Ferrari, Emanuele & Boysen, Ole & Boulanger, Pierre & Nechifor, Victor, 2021. "Food Security in Africa after the African Continental Free Trade Agreement – a Computable General Equilibrium Analysis," 2021 Conference, August 17-31, 2021, Virtual 315891, International Association of Agricultural Economists.
    6. Horridge, Mark & Ferreira-Filho, Joaquim Bento de Souza, 2003. "Linking GTAP to National Models: Some Highlights and a Practical Approach," Conference papers 331115, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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