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GTAP Resource #1079

"The Global Trade and Environment Model"
by Pant, Hom, Vivek Tulpule and Brian Fisher

The dynamic feature of the Global Trade and Environment Model (GTEM) has been enhanced. It is now based on intertemporal optimisation with investors having perfect foresight and savers having myopic expectations. In this context, it has been shown that a fixed savings rate out of current income (GNP) is consistent with intertemporally optimising behavior of the households. This result provides theoretical justification for the use of a Cobb-Douglas utility function at the top-level of the household utility tree in CGE models like GTEM and GTAP. The other significant innovation is that the model has been calibrated using a single period non-steady state database and implemented with GEMPACK.
Because the model is calibrated with non-steady state data, the model was run for some exploratory simulations covering a century to examine whether the model, in the absence of other shocks, arrives at a steady-state equilibrium by the end of the simulation period (momentum simulation). In addition, a test is performed on the effects on the model solution of the assumption that agents form rational expectations compared with the assumption of static expectations. The main objective in this paper is to describe the derivation of intertemporal GTEM and present the results of these initial exploratory simulations with the intertemporal version of the model.
With momentum simulation, we have observed that the model displays the property of a neo-classical growth model in the aggregate and the growth rate of each regional economy tends to converge toward the growth rate of its exogenously supplied factors. The assumption about expectations formation did not affect the trajectory noticeably.

Resource Details (Export Citation) GTAP Keywords
Category: 2002 Conference Paper
Status: Published
By/In: Presented at the 5th Annual Conference on Global Economic Analysis, Taipei, Taiwan
Date: 2002
Created: Pant, H. (5/2/2002)
Updated: Bacou, M. (7/2/2002)
Visits: 3,657
No keywords have been specified.

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