Course title:
Applied General Equilibrium Trade Policy Analysis
Dr.
Researcher
US International Trade Commission
Objective This short course intends to provide basic
concepts and necessary tools for senior and graduate students in applied economics,
international trade, and international relations to construct Computable
General Equilibrium model to conduct trade policy analysis. The emphasis of
this course is on the word applied.
Students will work with explicit function forms, numerical examples, and
computer software (GAMS) to learn the basic skills of how to develop their own
models based on particular policy issues at hand, including developing an
appropriate model structure, assembling and balancing the benchmark data set,
deriving and calibrating the model, computing counterfactual equilibriums, and
interpreting results.
Prerequirements It is assumed that the student has taken principles of microeconomics, Calculus, Liner Algebra, and basic computer programming.
Course Description
The course will start from introducing the basic structure of a CGE model and its role in trade policy analysis; then the building block and basic structure of a single country and a multi-country CGE model will be presented in both their semantic and mathematical representations.
The Social Accounting Matrix provides a consistent framework to organize statistical data for an economy to satisfy the requirements of a benchmark data set for CGE modeling. Because this accounting system is central to any general equilibrium policy analysis, the Social Accounting Matrix and the method of how to balance it are also covered after outline basic structure of CGE model.
Conducting general equilibrium trade policy analysis one has to know general equilibrium theory, to be familiar with data and be able to manipulate and convert it into a model admissible form, to have a clean sense of policy issues and institutional structure, and to be able to implement the model in computer, i.e. the knowledge of computer programming is one of the basic requirements of CGE analysis. Therefore, an introduction to the computer software, General Algebraic Modeling System (GAMS), which is one of the major modeling language widely used today in CGE modeling will also integrate into the course. Students go through this course should be able to conduct simple programming task (or at least be able to understand GAMS program).
After developing the necessary concept framework
and empirical tools, Two applications related to
Course Requirements:
There will be daily reading assignment designed to
reinforce the material covered in class lectures. As the course progresses the
use of micro-computer will be involved.
Course Outline:
Six lectures
I. Introduction of Computable General Equilibrium models and why we need
Computable General Equilibrium Trade Policy Analysis?
Francois Joseph F. and Kenneth A. Reinert (1997) Applied Methods for Trade Policy Analysis –
A handbook Cambridge University Press,
Shoven J. B. and J. Whalley (1992) "Applying general
equilibrium." Chapter 1
Shoven, J. B. and J. Whalley (1984) "Applied General Equilibrium
Models of Taxation and
International Trade," Journal of Economic Literature Vol. 22, pp
1007-1051.
de Melo, J. " Computable General Equilibrium Models for Trade
Policy Analysis in Developing Countries," Journal of Policy Modeling,
10(3):469-503
Mercenier, J. and T. N. Srinivasan (1994) "Applied General
Equilibrium and Economic Development." The
Ginsburgh, Victor and Michiel Keyzer (1997) The Structure of Applied General
Equilibrium Models, The MIT Press,
II. Basic Structure for CGE Models
1. The role of neoclassical theories of
producer and consumer behavior, competitive equilibrium in structuring the
model
2. Notation and building Block
3.
Basic structure of single country CGE models
4.
Basic structure of multi-country CGE models
5
Macro closure in CGE models.
6. Dynamics in CGE model
Dervis, K. J. de Melo and S. Robinson (1982) "General equilibrium
models for development policy."
Shoven J. B. and J. Whalley (1992) "Applying general
equilibrium." Chapter 2 and 4
Robinson, Sherman, Zhi Wang and Will Martin “Capturing the Implications of Services Trade Liberalization.” Economic System Research, 14(1):3-33, March 2002.
“The G-cubed (Agriculture) Model: A tool for Analyzing
Agriculture in a Globalizing World.” (with
Lofgren, Hans, Rebecca Lee Harris, Sherman Robinson “A Standard
Computable General Equilibrium (CGE) Model in GAMS” page 8 -17.
Ginsburgh, Victor and Michiel Keyzer (1997) The Structure of Applied General Equilibrium Models, The MIT Press,
Class note2 Model Specification
III.
Data Structure: An Accounting Framework
and Benchmark Data Set for CGE Analysis: The Social Accounting Matrix (SAM)
1. Basic concept and framework of a Social
Accounting Matrix (SAM)
2. SAM underlying CGE models
3. Parameter
Specification and Model Calibration
Pyatt, G (1988) "A SAM Approach to Modeling." Journal of
Policy Modeling 10(3):327-352.
Lofgren, Hans, Rebecca Lee Harris, Sherman Robinson “A Standard
Computable General Equilibrium (CGE) Model in GAMS” page 3 -7.
Robinson,
McDonald, Scott and Karen Thierfelder (2004), Deriving a Global Social
Accounting Matrix from GTAP Versions 5 and 6 Data, GTAP
Technical Paper No. 22.
GAMS Lab and Discussion 1
Introduction to GAMS, Using GAMSIDE, Basic
GAMS Programming, balancing and updating SAM as a Constrained Matrix Problem.
McCarl, Bruce A. “ Using
GAMSIED”
Rosenthal, RiChard E. “A GAMS Totorial” http://www.gams.com/docs/gams/Tutorial.pdf
Brook, A. D. Kendrick, A. Meeraus and R. Raman (1998)
"GAMS - A User's Guide."
GAMS Development Corporation.
http://www.gams.com/docs/gams/GAMSUsersGuide.pdf
Sherman Robinson, Andrea
Cattaneo, Moataz El-Said, "Estimating a Social
Accounting Matrix Using Cross Entropy Methods," International Food Policy
Research Institute, October 1998.
GAMS Program and Data Part 1.
IV. Constraint Matrix balance procedure and its applications in data
reconciliations
Patrick Canning and
V. Application of Recursive Dynamic CGE Model in Trade Policy Analysis:
The Economic Impact of
Wang, Zhi “Impact of China’s WTO Accession
on the Patterns of World Trade.” Journal
of Policy Modeling 25(1): 1-41,
January 2003.
VI. Application of Static CGE Model in Trade Policy Analysis: The Impact
of Economic Integration of “Greater
GAMS Lab and Discussion 2
Calibration of the CGE Models in GAMS. Simulations in GAMS CGE model.
IFPRI standard single country CGE model
CEA multi-country CGE model
Lofgren, Hans, Rebecca Lee Harris, Sherman Robinson “A Standard Computable General Equilibrium (CGE) Model in
GAMS” page 42-45.
Keyzer, Michiel (1997) “Building Applied General Equilibrium Models with GAMS: Examples and Additional Utility” Memo