Robert McDougall

Theoretical Structure of Dynamic GTAP

This paper documents the foreign asset ownership and investment theory of the dynamic GTAP Model (GTAP-Dyn). The new investment theory offers a disequilibrium approach to modeling endogenously international capital mobility. It permits a recursive solution procedure, a feature that allows easy implementation of dynamics into any static AGE model without imposing limitations on the models size. The method involves treating time as a variable, not as an index. having time as a variable allows the construction of dynamic GTAP with minimum modifications to the existing structure of GTAP, by separating the theory of static GTAP from the length of run.

An Overview of the GTAP 9 Data Base

This paper provides an overview of the Global Trade Analysis Project (GTAP) Data Base and its latest release, version 9. The GTAP Data Base has been used in thousands of economy-wide analyses over the past twenty-five years. While initially focused on supporting trade policy analysis, the addition of satellite accounts pertaining to greenhouse gas emissions and land use has resulted in a surge of applications relating to climate change as well as other environmental issues. The Data Base comprises an exhaustive set of accounts measuring the value of annual flows of goods and services with regional and sectoral detail for the entire world economy. These flows include bilateral trade, transport, and protection matrices that link individual country/regional economic datasets. Version 9 disaggregates 140 regions, 57 sectors, 8 factors of production, for 3 base years (2004, 2007 and 2011). The great success enjoyed by this Data Base stems from the collaboration efforts by many parties interested in improving the quality of economic analysis of global policy issues related to trade, economic development, energy and the environment.

Dynamic Modeling and Applications for Global Economic Analysis: A Baseline Scenario for the Dynamic GTAP Model

Paper developed for the Short Course on the Dynamic Model, October, 2000. The increasing interest in dynamic models and in particular the development of the Dynamic GTAP model at the Center for Global Trade Analysis has highlighted the need to develop a base case scenario depicting how the world economy might be expected the change over the next 20 years. The purpose of this paper is to show how such a base case scenario has been created for use with the Dynamic GTAP model (Ianchovichina, 1998 and Ianchovichina, McDougall and Hertel, 1999) and GTAP data base. This document is intended to be used in conjunction with a base case aggregation program which was constructed at the Center for Global Trade Analysis. This program takes as its inputs macro and policy forecasts and allows the user to: 1) alter various assumptions about the implementation of policies; and 2) aggregate over time, regions and commodities; to obtain a base case scenario which is specific to their needs. Although the base case program is specifically designed with the Dynamic GTAP model in mind, it is general enough to be used with other models. It should be noted however, that the base case scenario developed here is very general, it looks only at the standard macro aggregates and does not provide alternative optimistic or pessimistic scenarios.

Dynamic Modeling and Applications for Global Economic Analysis: An Overview of the Dynamic GTAP Data Base: The Data Base Construction and Aggregation Programs

The GDyn Data Base, used with the Dynamic GTAP model, is based on the GTAP Data Base (Dimaranan, 2005), which describes the global economy in a given year (2001 for the GTAP 6 Data Base). The GTAP Data Base is augmented with additional data required for the Dynamic version of the GTAP model. This chapter covers the preparation of these additional elements of the GDyn Data Base, 1 and the manipulation and aggregation of the GDyn Data Base with various utility programs. The focus is on the additional data requirements, with minimal discussion of the dynamic parameters. Readers interested in the underlying GTAP Data Base are referred to Dimaranan (2006). The GTAP data base (Dimaranan, 2006) is changed in the following three ways to obtain a database for GDyn: a) Six new arrays, listed in table 1, are added to the standard GTAP data file. The values of regional savings also change from those in the standard GTAP Data Base. The dimension of the array however does not change. These changes are discussed in section 2 below. b) A new parameters file contains the seven new parameters used in the dynamic theory (Table 2). The methodology for estimating econometrically, and in some 1 We have occasion at various points to refer to specific versions of the GDyn data base. We use a version numbering system of the form <GTAP release>:<GDyn version>. The element <GDyn version> is of the form <GDyn major version>.<GTAPDyn minor version>. We declare a new major version to mark a major difference in data content; a new minor version, to mark a change in format or a minor change in content. For example, version 6:1.0 of the GDyn data base is based on release 6 of the GTAP data base. Version 6:2.0 is based on the same GTAP release, but incorporates more recent GDyn specific data. At the time of writing, the current version is 6:2.0.

Dynamic Modeling and Applications for Global Economic Analysis: Behavioral and Entropy Parameters in the Dynamic GTAP Model

This paper develops econometric underpinnings for the behavioral and entropy parameters in the GTAP-Dyn model to add realism to the projections with the model. The long-run equilibrium in the model is defined as the convergence of the risk adjusted net rates of return to capital across regions. In this study, the rates of return to capital are constructed using operating surplus obtained from SourceOECD data base and capital stock documented in Larson et al. (2000). These returns are used to test the hypothesis of convergence in rates of return across countries and to measure the degree of international capital mobility. Based on econometric analysis, the null hypothesis of no convergence is rejected. The speed of convergence in net rates of return to capital in 20 OECD countries is 9% per year. The lagged adjustment mechanisms determine regional investments which include both domestic investment and foreign investment via the global trust. Savings of the regional household, in turn, are spent on investment in the domestic economy and investments in the global trust. Period by period decisions about the investments and savings composition affect the composition of capital and allocation of wealth of a region. In this work, the parameters determining the relative rigidities of composition of capital and allocation of wealth in the GTAP-Dyn model are estimated using country portfolios data base. While there are differences in the relative rigidities of the composition of capital and allocation of wealth across countries, in the majority of countries the split between capital belonging to foreigners and capital belonging to local households is much more rigid than the split between equity in local firms and equity in foreign firms. The results of the econometric investigation are used to set the capital mobility and rigidity parameters in the model.

The Standard GTAP Model, Version 7

This paper provides complete documentation for version 7 of the ‘standard’ Global Trade Analysis Project (GTAP) model. This is the first comprehensive documentation of the model since the 1997 ‘GTAP book’ and this updated version includes some important new features. On a substantive level, commodities and activities are separated, allowing for multi-product sectors, as well as multiple sectors producing the same commodity. Additional flexibility is provided for modeling of production and consumption behavior, and the valuation and naming conventions have been modified. In addition, this paper folds in important advances since the 1997 publication, including the revised treatment of non-homotheticity in final demand, the welfare decomposition and multi-modal international transportation. The paper opens with an overview which puts this widely used model in broader context. The model exposition is comprehensive and includes a bridging table linking the original, ‘classic’ model with the current version. This is followed by a section discussing the major extensions of the standard model and how they are being used. The paper closes with an overall assessment and a discussion of future research directions.

Including Fossil-fuel Consumption Subsidies in the GTAP Data Base

Historically fossil-fuel consumption subsidies have been one of the most widely used energy and public policy interventions. According to the International Energy Agency (IEA), in 2014 they amounted to

Building a global database: consequences for the national I–O data

493 billion worldwide, which is equivalent to 0.6% of global GDP. Their contribution is even more significant for most energy exporting countries, in many cases exceeding 5-15% of national GDP. However, despite their large magnitude, fossil-fuel consumption subsidies are not explicitly represented in most global economic databases and models, including the Global Trade Analysis Project (GTAP) Data Base, as they are generally not captured by the input-output framework. In this paper, we present methods to integrate pre-tax fossil-fuel consumption subsidies to the GTAP Data Base and produce a version of the GTAP 9.2 Data Base that includes these subsidies. The proposed approach includes updates of energy commodity market prices and corresponding tax rates, within the GTAP Data Base build process. Including fossil-fuel consumption subsidies in the GTAP Data Base provides several benefits for energy and environmental policy simulations, including availability of an additional policy instrument and more consistent representation of energy prices.

Global trade, assistance, and production : The GTAP 5 Data Base

ABSTRACT Global economic analysis requires consistent and balanced data, which necessitates the reconciliation of datasets from both national and international sources. In the case of the Global Trade Analysis Project Data Base, datasets supplied by international sources are considered preferable to national input–output (I–O) tables. As a result, the national I–O data can experience significant adjustments during the reconciliation process due to differences between the national and international datasets. The purpose of this paper is to examine the extent to which national I–O data change during reconciliation. The results demonstrate that the I–O data are altered by the construction process, particularly from the reconciliation of the national I–O data to the international trade and energy datasets. Closer examination reveals potential issues with both the trade and energy datasets, as well as the national I–O data – illustrating the challenges associated with reconciling data from multiple sources.