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Overview of Dynamic GTAP Model Terrie L. Walmsley Model by: Elena Ianchovichina and Robert A. McDougall • • • • • The Dynamic GTAP Model Based on standard GTAP Model. Recursive Dynamic Accumulation of Capital stocks. Foreign Capital Ownership. Disequilibrium theory of Investment. Center for Global Trade Analysis, Purdue University Disequilibrium Approach Equalisation of rates of return over time. Problem 1: Implies Perfect Capital Mobility. Gradual equalisation of rates of return. Perfect Capital Mobility in long-run only. Problem 2: Theory and Data - Inconsistent. Errors in expectations Center for Global Trade Analysis, Purdue University Investment Theory 1. Reduction of errors in expectations expected rate of return moves towards actual rate of return. 2. Gradual movement of rates of return to equality over time. 3. Gradual equalisation of growth rates over time to a steady-state rate. This is required to keep rates of return constant. Center for Global Trade Analysis, Purdue University Developing a Common Baseline Terrie L. Walmsley and Robert A. McDougall Last Year’s Meeting 1. 2. 3. 4. 5. Many GTAP users are doing Dynamic modeling and need a baseline scenario Country Level (Not GTAP regions). Sharing of data 1990 to 2050. (2100? or pre 1990) GDP, POP, Consumption, Labor, Skilled and Unskilled, Investment, Capital, Protection, Technology, Energy, Savings. Center for Global Trade Analysis, Purdue University A Base Case Scenario 1. Period: 1995 to 2020. 2. Macro: GDP, population, Labor, Skilled and Unskilled labor, Investment, Capital - 202 Countries. 3. Policy: Uruguay Round, Agreement on Textiles and Clothing, China’s Accession, Post-UR tariff reductions - GTAP regions. Center for Global Trade Analysis, Purdue University Macro Data GDP, Investment and Population • Yearly, 1992 - 2007, 133 countries, WB. Total Labor • 5-yearly, 1990 - 2020, 205 countries, WB. Skilled Labor • 5-yearly, 1990 - 2020, 71 developing A&F. • Single growth rate, 25 developed, WB. Center for Global Trade Analysis, Purdue University Macro Macro GDP POP GDI Capital Unskilled Labor Skilled Labor Aggregate to GTAP Regions Center for Global Trade Analysis, Purdue University • Fill-in missing countries • Extrapolate to fill-in missing years • Yearly growth rates for 202 countries (1995-2020) • Aggregate to GTAP regions. 15 1 NAm e ric a 2 WEuro pe 10 3 Aus NZL 4 J a pa n 5 C hina 0 7 OthNIC s 8 Indo ne s ia -5 10 India 13 OthLa tAm -10 16 EIT Tim e Center for Global Trade Analysis, Purdue University 19 20 16 20 13 20 10 20 07 20 04 20 01 20 98 17 S o AfrC U 19 95 -15 19 Growth in Real GDP 5 19 R OW 1 NAm e ric a 12 2 WEuro pe 10 3 Aus NZL 4 J a pa n 8 6 7 OthNIC s 4 8 Indo ne s ia 10 India 2 13 OthLa tAm 0 16 EIT 17 S o AfrC U Time Center for Global Trade Analysis, Purdue University 19 20 16 20 13 20 10 20 07 20 04 20 01 20 98 19 95 -2 19 Growth in Capital 5 C hina 19 R OW 1 NAm e ric a 2.5 2 3 Aus NZL 1.5 4 J a pa n 5 C hina 1 7 OthNIC s 0.5 8 Indo ne s ia \ 10 India 0 13 OthLa tAm Time Center for Global Trade Analysis, Purdue University 20 20 17 20 14 20 11 20 08 20 05 20 02 20 99 16 EIT 19 96 -0.5 19 Growth in Population 2 WEuro pe 17 S o AfrC U 19 R OW 3 1 NAm e ric a 2.5 2 WEuro pe Growth in Labor 2 3 Aus NZL 1.5 1 4 J a pa n 0.5 5 C hina 0 7 OthNIC s -0.5 8 Indo ne s ia -1 10 India -1.5 1995- 2000- 2005- 2010- 20152000 2005 2010 2015 2020 T ime Center for Global Trade Analysis, Purdue University 13 OthLa tAm 17 S o AfrC U 19 R OW Labor • Unskilled labor - Currently use growth in total labor. • Using difference between total and skilled labor causes problems - Developed countries. Center for Global Trade Analysis, Purdue University Policy • • • • • • Uruguay Round - Francois and Strutt ATC phase-out (tax equivalents) – GTAP China’s pre-WTO tariff cuts - Fan and Zheng China’s WTO accession - Martin Taiwan - Av mnfcs tariffs reduced to 4% Post-UR - tariffs reduced to zero over 20 years Center for Global Trade Analysis, Purdue University Policy Shocks UR and ATC Agreement (excluding China and Taiwan) 1995 2000 China’s preWTO trade lib 2005 China’s (Taiwan) WTO Accession Center for Global Trade Analysis, Purdue University Post-UR Trade Liberalization 2010 2015 2020 Policy Shocks UR and ATC Agreement (excluding China and Taiwan) 1995 2000 China’s preWTO trade lib Post-UR Trade Liberalization 2005 China’s (Taiwan) WTO Accession Center for Global Trade Analysis, Purdue University 2010 2015 2020 Policy Shocks UR and ATC Agreement (excluding China and Taiwan) 1995 2000 China’s preWTO trade lib Post-UR Trade Liberalization 2005 2010 China’s (Taiwan) WTO Accession Center for Global Trade Analysis, Purdue University 2015 2020 Policy Shocks Policies are implemented so that the change is the same each year. Further work on ATC - need to be back loaded. Elimination of quotas is treated as a reduction in export tax equivalents. Center for Global Trade Analysis, Purdue University Macro GDP POP GDI Capital Unskilled Labor Skilled Labor Aggregate to GTAP Regions Macro GDP POP GDI Capital Unskilled Labor Skilled Labor Aggregate to GTAP Regions Adjusted URTV Policy Macro GDP POP GDI Capital Unskilled Labor Adjusted URTV Skilled Labor Aggregate to GTAP Regions Aggregation Program Policy What Now? • • • • Labor ATC - back load New forecasts of macro variables. Technological change. *Calibrate *Growth Accounting Center for Global Trade Analysis, Purdue University