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Climate Policy and Trade: Dynamics and the Steady-State Assumption in a multi-regional Framework

  • Katrin Springer
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    Most dynamic trade models assume steady state or balanced growth. This paper argues while this can be done in a single region model or a model without trade, the steady state assumption is problematic in a multi-regional setting with trade interactions. This paper shows the consequences of assuming a balanced growth path and discusses several problems which are connected to the calibration of recursive dynamic multi-regional trade models. Furthermore, it is demonstrated how different dynamic specifications of the base run path affect the results of a policy scenario by imposing the Kyoto Protocol. The simulations illustrate that a balanced growth path can not be maintained in a multi-regional trade model due to international trade spill-overs. It is shown that the model results and thus the assessment of climate policy options depend substantially on the dynamic specification.

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    Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 952.

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    Length: 40 pages
    Date of creation: Oct 1999
    Date of revision:
    Handle: RePEc:kie:kieliw:952
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    1. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550.
    2. Bhattacharyya, Subhes C., 1996. "Applied general equilibrium models for energy studies: a survey," Energy Economics, Elsevier, vol. 18(3), pages 145-164, July.
    3. Nordhaus, William D & Yang, Zili, 1996. "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies," American Economic Review, American Economic Association, vol. 86(4), pages 741-65, September.
    4. Alan Manne & Richard Richels, 1992. "Buying Greenhouse Insurance: The Economic Costs of CO2 Emission Limits," MIT Press Books, The MIT Press, edition 1, volume 1, number 026213280x, June.
    5. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
    6. repec:tpr:qjecon:v:107:y:1992:i:2:p:407-37 is not listed on IDEAS
    7. Arnold C. Harberger, 1962. "The Incidence of the Corporation Income Tax," Journal of Political Economy, University of Chicago Press, vol. 70, pages 215.
    8. Pereira, Alfredo M. & Shoven, John B., 1988. "Survey of dynamic computational general equilibrium models for tax policy evaluation," Journal of Policy Modeling, Elsevier, vol. 10(3), pages 401-436.
    9. John Y. Campbell & N. Gregory Mankiw, 1987. "Permanent Income, Current Income, and Consumption," NBER Working Papers 2436, National Bureau of Economic Research, Inc.
    10. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
    11. N. Gregory Mankiw & David Romer & David N. Weil, 1990. "A Contribution to the Empirics of Economic Growth," NBER Working Papers 3541, National Bureau of Economic Research, Inc.
    12. Springer, Katrin, 1998. "The DART general equilibrium model: A technical description," Kiel Working Papers 883, Kiel Institute for the World Economy.
    13. Diao, Xinshen & Somwaru, Agapi, 2000. "An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 557-588, September.
    14. repec:oup:qjecon:v:107:y:1992:i:2:p:407-37 is not listed on IDEAS
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