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An algorithm for sequential solutions of dynamic CGE models with perfect foresight over an infinite numbers of periods

Author

Listed:
  • T. Nicolaus Tideman
  • Florenz Plassmann

Abstract

We describe a simple algorithm that permits the sequential (period-by-period) solution of large-scale dynamic CGE models with agents who have perfect foresight over an infinite number of periods. The algorithm requires neither any assumptions about behavior in a ?final? period nor that the base case economy be currently in steady state. We briefly illustrate the algorithm with an analysis of substituting a flat tax for all income taxes in the United States.

Suggested Citation

  • T. Nicolaus Tideman & Florenz Plassmann, 2006. "An algorithm for sequential solutions of dynamic CGE models with perfect foresight over an infinite numbers of periods," Working Papers e07-6, Virginia Polytechnic Institute and State University, Department of Economics.
  • Handle: RePEc:vpi:wpaper:e07-6
    as

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    File URL: ftp://repec.econ.vt.edu/Papers/Tideman/CGEAlgorithm.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. Wendner, Ronald, 1999. "A Calibration Procedure of Dynamic CGE Models for Non-steady State Situations Using GEMPACK," Computational Economics, Springer;Society for Computational Economics, vol. 13(3), pages 265-287, June.
    2. Blejer, Mario I. & Feldman, Ernesto V. & Feltenstein, Andrew, 2002. "Exogenous shocks, contagion, and bank soundness: a macroeconomic framework," Journal of International Money and Finance, Elsevier, vol. 21(1), pages 33-52, February.
    3. Dixon, Peter B. & Pearson, K.R. & Picton, Mark R. & Rimmer, Maureen T., 2005. "Rational expectations for large CGE models: A practical algorithm and a policy application," Economic Modelling, Elsevier, vol. 22(6), pages 1001-1019, December.
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