NOPOOR Project - Universidad Autónoma de Madrid

Report
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
COMPUTABLE GENERAL
EQUILIBRIUM MODELS (CGE):
BASICS
Saúl de Vicente Queijeiro
October 21st , 2013
UNIVERSIDAD AUTÓNOMA DE MADRID (UAM)
COMPUTABLE GENERAL EQUILIBRIUM MODELS (CGE)
IMPLEMENTATION OF A CGE MODEL
Data Source: structure of a SAM
Behavioral equations
Market-clearing conditions
SOLVING THE MODEL
Shock simulation
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
COMPUTABLE GENERAL EQUILIBRIUM MODELS (CGE)
DATA SOURCE: SOCIAL ACCOUNTING MATRIX (SAM)
THEORETICAL FRAMEWORK: SIMPLIFIED MODEL
SIMPLIFIED MODEL USING EXCEL
SIMPLIFIED MODEL USING GAMS
THEORETICAL FRAMEWORK: EXTENDED MODEL
EXTENDED MODEL USING GAMS: SIMULATION
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
IMPLEMENTATION OF A CGE MODEL: CGE framework
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
IMPLEMENTATION OF A CGE MODEL: CGE framework-SAM
Structure (source: Breisinger et al, 2009)
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
IMPLEMENTATION OF A CGE MODEL: CGE
framework-SAM Structure
Activities
Activities
Commodities
Labor
Capital
Households
Government
Investment
Rest of world
24,996
Total
24,996
Commodities
12,029
12,142
Labor
9,717
9,717
Capital
3,250
3,250
Households
9,717
Government
3,250
2,372
Total
4,680
1,387
940
Savings
3,272
Rest of world
1,805
860
5,151
2,001
16,354
739
4,052
548
4,680
8,439
24,996
35,807
35,807
8,439
9,717
3,250
16,354
4,052
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
4,680
8,439
CGE THEORETICAL FRAMEWORK: SIMPLIFIED MODEL
•GOODS: BREAD AND WINE
•FACTORS:
•CAPITAL
•LABOUR
•INSTITUTIONS: HOUSEHOLDS
BRD
BRD
WIN
CAP
LAB
HOH
TOTAL
WIN
CAP
LAB
HOH
TOTAL
15
35
5
10
15
20
15
35
25
25
25
25
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
50
15
35
25
25
50
CGE THEORETICAL FRAMEWORK: SIMPLIFIED MODEL
BEHAVIORAL EQUATIONS
HOUSEHOLDS
S.T.
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
CGE THEORETICAL FRAMEWORK: SIMPLIFIED MODEL
BEHAVIORAL EQUATIONS
FIRMS
Max
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
CGE THEORETICAL FRAMEWORK: SIMPLIFIED MODEL
MARKET CLEARING CONDITIONS
Market Equilibrium
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
CGE MODEL USING GAMS/EXCEL: STEPS
DEFINITION OF TABLE NAME AND ITS SUFFICES
LOADING DATA FROM SAM
DECLARING AND FULLFILING PARAMETERS (EXOGENOUS AND INITIAL VALUES OF ENDOGENOUS)
CALIBRATION: Declaring parameters (elasticities and technology state), obtained directly from the
functional forms of the actors' behavior and the SAM. (EXOGENOUS)
MODEL SYSTEM DECLARATION:
DECLARING VARIABLES (ENDOGENOUS)
DECLARING ECUATIONS
CHOSING FUNCTIONAL FORMS OF BEHAVIOR EQUATIONS AND MARKET CLEARING CONDITIONS
OBJECTIVE FUNCTION
INITIALIZING VARIABLES AND SETTING LOWER BOUNDS
SOLVING THE MODEL
SIMULATION
DISPLAYING RESULTS AND BENCHMARKING
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
EXTENDED MODEL: WHAT IS NEW?
•HOUSEHOLDS (DISPOSABLE RENT)
•FIRMS (INTERMEDIATE INPUTS)
•GOVERNMENT (TAXES)
•INVESTMENT (SAVING)
•INTERNATIONAL TRADE
•SMALL COUNTRY ASSUMPTION
•ARMINGTON ASSUMPTION
•MARKET CLEARING CONDITIONS
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
EXTENDED MODEL: GENERAL STRUCTURE
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
CGE THEORETICAL FRAMEWORK: EXTENDED MODEL
•GOODS: BREAD AND WINE
•FACTORS:
•CAPITAL
•LABOUR
•INSTITUTIONS: HOUSEHOLDS, GOVERNMENT(WITH TARIFFS AND INDIRECT TAXES), INVESTMENT
AND REST OF THE WORLD
BRD
WIN
CAP
LAB
HOH
GOV
INV
IDT
TRF
EXT
TOTAL
BRD
21
17
20
15
5
1
13
92
WIN
8
9
30
25
4
2
11
89
CAP
LAB
50
40
50
40
HOH
20
30
GOV
19
14
23
17
2
90
35
INV
16
15
IDT
TRF
9
3
EXT
8
4
12
31
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
9
3
24
TOTAL
92
89
50
40
90
35
31
9
3
24
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
HOUSEHOLDS
New income constraint:
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
FIRMS: INTERMEDIATE INPUTS
-The bottom stage:


  =   −
ℎ ℎ
ℎ
Subject to;
-The top stage:




=


−

 +




 ,  , 

 

Subject to:
 = min
      
,
,
       
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
INTERMEDIATE INPUTS
 :   ℎ  − ℎ   ℎ  

 :   ℎ  − ℎ   ℎ  
 :    ℎ  − ℎ 
 :    ℎ  − ℎ    ℎ  − ℎ 
 :    ℎ  − ℎ 
 :      ℎ 
− ℎ        

=             
 =    ℎ  − ℎ 

 =   ℎ  − ℎ  , 

 =   ℎ    ℎ  − ℎ 
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
INTERMEDIATE INPUTS
 =   , ∀
 =   , ∀

ℎ =
ℎ   
ℎ
 , ∀ℎ
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
INTERMEDIATE INPUTS
zero-profit condition:

 =   −   +
  



=   −    +
  
= 0, ∀



 =   +
  . ∀

NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
GOVERNMENT

 :    ℎ  − ℎ 
 :      ℎ  − ℎ 
 :      ℎ 
− ℎ        .

 :  , 
 : ℎ    ℎ 
− ℎ  0 ≤  ≤ 1,

 = 1
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
INVESTMENT
 =



 +  +  . ∀
S: private saving
S f : foreign saving or current account deficit in balance of payment in foreign currency
Xiv : investment demand for the i − th comodity
ε: exchange rate (local currency per foreign currency)
λi : share of expediture for the i − th commodity (0 ≤ λi
≤ 1,
i
λi = 1
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
•INTERNATIONAL TRADE: SMALL COUNTRY ASSUMPTION
 =   , ∀
 =   , ∀

  +  =


 
Balance of payments condition
 :    ℎ  − ℎ      ()
 =    ℎ  − ℎ     ,
 =     ℎ  − ℎ 
 =    ℎ  − ℎ      ()
 =    ℎ  − ℎ     , 
 =     ℎ  − ℎ 
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
•INTERNATIONAL TRADE: ARMINGTON ASSUMPTION
 

 =   −   +  
 ,  , 
S. T:
 =

  
+
1
 
 
1
 1−
  


 =
1
 1−
  

 , ∀

 =
 , ∀
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL.
BEHAVIORAL EQUATIONS
•INTERNATIONAL TRADE: ARMINGTON ASSUMPTION:
 
 =   +   −  +   ,
, , 
S.T:
 = 
∅
  
+
1
∅ ∅
 
 =
 =

∅

∅
 ( +

  +

1
 1−∅
 )

1
1−∅
 , ∀
 , ∀
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THEORETICAL FRAMEWORK: EXTENDED MODEL
•MARKET CLEARING CONDITIONS


 =  +  +  +
 , ∀

ℎ = ℎ ∀ℎ

NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
EXTENDED MODEL USING GAMS
•DEFINITION OF TABLE NAME AND ITS SUFFICES
•LOADING DATA FROM SAM:
• 5 COLUMUNS (+)
•IMPORTING DATA FROM A TXT. FILE
• DECLARING AND FULLFILING PARAMETERS
INITIAL VALUES OF ENDOGENOUS )
•VALUE ADDED AND INTERMEDIATE INPUTS
• GOVERNMENT (TAXES)
• S-I
• REST OF THE WORLD
•COMPOSITE GOODS (ARMINGTON)
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
(EXOGENOUS AND
EXTENDED MODEL USING GAMS
•CALIBRATION: DECLARING AND CALCULATING
PARAMETERS (EXOGENOUS)
•SUBSTITUTION ELASTICITIY PARAMETER
•TRANSFORMATION ELASTICITY PARAMETER
•SHARE PARAMETERS (LEONTIEF, CES, CET)
•AVERAGE PROPENSITY FOR SAVING
•TAX RATE
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
EXTENDED MODEL USING GAMS
•DEFINING MODEL SYSTEM
•VARIABLES (ENDOGENOUS)
•EQUATIONS
•HOUSEHOLD CONSUMPTION
•DOMESTIC PRODUCTION: VA, INTERMEDIATE DEMANDCOST
FUNCTION
•GOVERNMENT
•INVESTMENT
•INTERNATIONAL TRADE:
•PRICES
•ARMINGTON AND TRANSFORMATION FUNCTIONS
•MARKET CLEARING CONDITIONS
•SAVINGS: (NUMBER OF VARIABLES=NUMBER OF EQUATIONS)
•OBJECTIVE FUNCTION
•INITIALIZING VARIABLES AND SETTING LOWER BOUNDS
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
EXTENDED MODEL USING GAMS
•SIMULATION
•DIFFERENCES BETWEEN INITIAL EQUILIBRIUM AND COUNTERFACTUAL SOLUTION
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
NOPOOR Project
"Enhancing Knowledge for Renewed Policies against Poverty"
THANK YOU
Saúl de Vicente Queijeiro
October 21st , 2013
UNIVERSIDAD AUTÓNOMA DE MADRID (UAM)

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