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How can countries successfully engage in global production networks? We provide a Computable General Equilibrium analysis of the impact of FDI on global production networks in Textiles, Chemicals, Electronics and Machinery, dividing the world economy in six regions (China, East Asia, Japan, EU28, the U.S. and the group of Emerging and Developing Economies). Interestingly for the policy maker, although the four sectors have contrasting production technologies, their Chinese exports and imports still follow a similar trend: East Asia and Japan are Chinese main intermediate suppliers while the US, Europe and the Emerging and Developing Economies play more the role of final markets. FDI inflows have benefitted China and we quantify by how much they have raised Chinese wages, GDP, national income and export competitiveness. By contrast, being an intermediate supplier or playing mostly the role of big final market in the network is not enough to succeed in your integration with China. The extent of the (positive or negative) effects is very much related to whether the structure of production (i.e., sectors’ weight in GDP) of the different economies is similar to (and therefore more easily crowded out by) Chinese booming sectors. © 2021 The Society for Policy Modeling. Published by Elsevier Inc. All rights reserved., Education Department of Hunan Province, Social Science Foundation of Hunan Province, China Scholarship Council, Spanish Ministry of Economy and Competitiveness, Depto. de Estadística y Ciencia de los Datos, Fac. de Estudios Estadísticos, TRUE, pub

The Transatlantic Trade and Investment Partnership (TTIP) has been one of the most heavily debated issues in international economics over the last few years. We analyze its potential impact on the world, including both insiders and outsiders of the agreement, using a Computable General Equilibrium (CGE) model with Foreign Direct Investment (FDI) under imperfect competition. In our simulation, TTIP consists of reductions of tariffs, non-tariff barriers and barriers to FDI. Our results show that the FDI component, which has often been neglected in previous studies, would contribute to nearly half of the overall impact of TTIP for the US and nearly one third for the EU. Insiders would heavily benefit from TTIP, whereas, it would be slightly negative for outsiders (Middle East, Sub-Saharan Africa, Latin America, Southeast Asia and Other Advanced Countries), except for the big Asian economies (China, Japan and India), which would remain unaffected. The slightly negative effects would turn into positive with an “inclusive TTIP” (i.e., one avoiding third country discriminating rules and standards). An inclusive TTIP would benefit both insiders, who would gain more than with the standard TTIP, and outsiders, who would be better off than without the TTIP. Welfare, GDP, wages, as well as aggregate imports and exports of the world economy would clearly increase following either a modest or ambitious TTIP agreement. Our results suggest that policy makers should resume TTIP negotiations and try to strike an inclusive and ambitious deal., Real Colegio Complutense at Harvard University, Center for International Development (CID) at the Harvard Kennedy School, Real Colegio Complutense, Spanish Ministry of Economy and Competitiveness, Depto. de Estadística y Ciencia de los Datos, Fac. de Estudios Estadísticos, TRUE, pub

Monográfico: El entorno económico-estratégico de la defensa, El presente trabajo sostiene la importancia de la inversión en defensa, como parte de la inversión pública, en la potenciación de la base industrial y tecnológica del país y en el desarrollo de sectores productivos innovadores. El análisis se realiza a través de un modelo de equilibrio general dinámico estocástico (DSGE). La principal conclusión que se deduce es que el aumento en la inversión pública, cuando es complementaria del progreso tecnológico asociado a la inversión privada, se traduce en un crecimiento de la producción, el empleo, la inversión y la productividad en el conjunto de la economía. En consecuencia, en la medida que la inversión pública en defensa es generadora de innovación y progreso tecnológico, también contribuye de forma positiva al crecimiento del país., This paper argues the importance of investment in defense, as part of public investment in enhancing the industrial and technological base of the country as well as in the development of innovative productive sectors. The analysis is performed through models of dynamic stochastic general equilibrium (DSGE). The main conclusion is that the increase in public investment, when it is complementary to the technological progress associated with private investment, translates into higher growth of production, employment, investment and productivity in the whole economy. Accordingly, to the extent that public investment in defense is generating innovation and technological progress, also it contributes positively to growth., Instituto Complutense de Estudios Internacionales, TRUE, pub

Since policy-makers usually pursue several conflicting objectives, policy-making can be understood as a multicriteria decision problem. Following the methodological proposal by André and Cardenete (2005) André, F. J. and Cardenete, M. A. 2005. Multicriteria Policy Making. Defining Efficient Policies in a General Equilibrium Model, Seville: Centro de Estudios Andaluces. Working Paper No. E2005/04, multi-objective programming is used in connection with a computable general equilibrium model to represent optimal policy-making and to obtain so-called efficient policies in an application to a regional economy (Andalusia, Spain). This approach is applied to the design of subsidy policies under two different scenarios. In the first scenario, it is assumed that the government is concerned just about two objectives: ensuring the profitability of a key strategic sector and increasing overall output. Finally, the scope of the exercise is enlarged by solving a problem with seven policy objectives, including both general and sectorial objectives. It is concluded that the observed policy could have been Pareto-improved in several directions., Dado que los responsables políticos suelen buscar en general diferentes objetivos que entran en conflicto entre sí, la elaboración de políticas públicas puede entenderse como un problema de decisión multicriterio. Siguiendo la propuesta metodológica de André y Cardenete (2005), usamos programación multiobjetivo en combinación con un modelo de equilibrio general computable para representar la elaboración óptima de políticas y, en una aplicación a una economía regional (Andalucía, España), obtenemos el conjunto de las llamadas políticas eficientes. Este planteamiento se aplica al diseño de las políticas de subvenciones en dos casos diferentes. En el primer caso, suponemos que al gobierno le preocupan sólo dos objetivos: asegurar la rentabilidad de un sector estratégico clave y aumentar la producción total de la economía. Luego aumentamos el alcance del ejercicio resolviendo un problema con siete objetivos políticos, incluyendo tanto objetivos generales como sectoriales. Concluimos que la política observada podría haber sido mejorada en el sentido de Pareto en varias direcciones., Depto. de Análisis Económico y Economía Cuantitativa, Fac. de Ciencias Económicas y Empresariales, TRUE, pub

¿Tiene la economía española un nivel óptimo de progresividad en el impuesto sobre la renta de las personas físicas (IRPF)? Este artículo cuantifica las consecuencias agregadas, distribucionales y de bienestar de establecer la progresividad del IRPF en su nivel óptimo. Con objeto de evaluar potenciales reformas fiscales, se calibra un modelo de equilibrio general con agentes heterogéneos que captura tanto el ciclo vital de los individuos como sus características heredadas de anteriores generaciones. Los resultados del estudio muestran que lo óptimo sería incrementar el nivel de progresividad actual del IRPF, si bien ello conllevaría una pérdida agregada de eficiencia en la economía. Aunque esta reforma óptima reduciría los niveles de desigualdad observados en las distribuciones de la renta y de la riqueza, se producirían también efectos agregados negativos en el capital, la mano de obra y el producto. Por último, los resultados teóricos son evaluados utilizando microdatos de impuestos. Esto pondría de manifiesto que, en el escenario actual, los hogares con rentas más altas están siendo gravados a un tipo medio efectivo de IRPF que se encuentra por debajo de su nivel óptimo., Is the Spanish economy positioned at its optimal progressivity level in personal income tax? This article quantifies the aggregate, distributional, and welfare consequences of moving towards such an optimal level. A heterogeneous households general equilibrium model featuring both life cycle and dynastic elements is calibrated to replicate some characteristics of the Spanish economy and used to evaluate potential reforms of the tax system. The findings suggest that increasing progressivity would be optimal, even though it would involve an efficiency loss. The optimal reform of the tax schedule would reduce wealth and income inequality at the cost of negative effects on capital, labor, and output. Finally, these theoretical results are evaluated using tax micro data and describe a current scenario where the income-top households typically face suboptimal effective average tax rates.

Almost all economic assessments of Brexit conclude that there would be significant losses for both the UK and the EU. This paper examines the driving forces behind these results. We consider the strong economic relationships between the UK and EU both at the sectoral and macroeconomic levels that are at risk from Brexit. We review fifteen studies that explore various Brexit scenarios (hard and soft) and explain why their different methodologies and assumptions yield different degrees of economic damage. Our review concludes that GDP losses for the UK from a hard Brexit range from 1.6 to 7.8, while a soft Brexit would moderate the losses by roughly half. We also find that potential UK trade agreements with third countries could partially compensate for significant Brexit losses. © 2019 Elsevier B.V., Ministerio de Economía y Competitividad (MINECO), German Federal Ministry for Economic Cooperation and Development, Depto. de Economía Aplicada, Estructura e Historia, Fac. de Ciencias Económicas y Empresariales, TRUE, pub

En este artículo se pretende identificar el canal de transmisión de los choques de prima de riesgo en las diferentes variables macroeconómicas. Por tanto, se formula un modelo DSGE para una economía pequeña y abierta, que considera el comportamiento de los hogares, las decisiones de inversión de parte de las empresas, la función de reacción del banco central y la dinámica de las diferentes variables externas, tales como la variación de los activos externos netos del país y el comercio exterior. El modelo se calibra con datos de la economía colombiana del periodo 2005-2017. En los resultados de la simulación se identifica la persistencia del shock de prima de riesgo en las variables endógenas que componen al modelo, y en especial se observan efectos sobresalientes del choque sobre el tipo de cambio, la tasa de interés y la inflación. Se concluye que el tamaño de la elasticidad de la prima de riesgo al endeudamiento externo domina la fuerza con la que inciden los shocks en la economía.

En este artículo se pretende identificar el canal de transmisión de los choques de prima de riesgo en las diferentes variables macroeconómicas. Por tanto, se formula un modelo DSGE para una economía pequeña y abierta, que considera el comportamiento de los hogares, las decisiones de inversión de parte de las empresas, la función de reacción del banco central y la dinámica de las diferentes variables externas, tales como la variación de los activos externos netos del país y el comercio exterior. El modelo se calibra con datos de la economía colombiana del periodo 2005-2017. En los resultados de la simulación se identifica la persistencia del shock de prima de riesgo en las variables endógenas que componen al modelo, y en especial se observan efectos sobresalientes del choque sobre el tipo de cambio, la tasa de interés y la inflación. Se concluye que el tamaño de la elasticidad de la prima de riesgo al endeudamiento externo domina la fuerza con la que inciden los shocks en la economía.

This paper studies the effects of uncertainty shocks on economic activity, focusing on inflation. Using a VAR, I show that increased uncertainty has negative demand effects, reducing GDP and prices. I then consider standard New Keynesian models with Rotemberg-type and Calvo-type price rigidities. Despite the belief that the two schemes are equivalent, I show that they generate different dynamics in response to uncertainty shocks. In the Rotemberg model, uncertainty shocks decrease output and inflation, in line with the empirical results. By contrast, in the Calvo model, uncertainty shocks decrease output but raise inflation because of firms' precautionary pricing motive.

This paper studies the effects of uncertainty shocks on economic activity, focusing on inflation. Using a VAR, I show that increased uncertainty has negative demand effects, reducing GDP and prices. I then consider standard New Keynesian models with Rotemberg-type and Calvo-type price rigidities. Despite the belief that the two schemes are equivalent, I show that they generate different dynamics in response to uncertainty shocks. In the Rotemberg model, uncertainty shocks decrease output and inflation, in line with the empirical results. By contrast, in the Calvo model, uncertainty shocks decrease output but raise inflation because of firms' precautionary pricing motive.

This paper studies the effects of uncertainty shocks on economic activity, focusing on inflation. Using a VAR, I show that increased uncertainty has negative demand effects, reducing GDP and prices. I then consider standard New Keynesian models with Rotemberg-type and Calvo-type price rigidities. Despite the belief that the two schemes are equivalent, I show that they generate different dynamics in response to uncertainty shocks. In the Rotemberg model, uncertainty shocks decrease output and inflation, in line with the empirical results. By contrast, in the Calvo model, uncertainty shocks decrease output but raise inflation because of firms' precautionary pricing motive.

This paper analyzes one of the features of the Chinese economic transition, namely, the impact of foreign direct investment (FDI) accruing to advanced services sectors. To that aim we use an innovative computable general equilibrium (CGE) model that includes, in a multi-regional setting, foreign multinationals operating in monopolistic competition. The model is based on data that split the world economy in 2016 into 11 regions (China - US - EU27 - Great Britain -other advanced economies - India - Japan - South East Asia - Latin America - Middle East - Sub Saharan Africa) and 21 sectors. We provide quantitative evidence on several characteristics of the 21 sectors in China, EU27 and the US, as well as other data on the role of China in the global stage, including its evolution since 2004. Several scenarios focusing on the increase of FDI inflows in services, because of the reduction of its FDI barriers, are simulated deriving short and long run results. We find that the impact of more foreign multinationals in services is positive for China but smaller than the one that had been obtained in other previous studies on FDI in manufactures. This is due to the still limited role of services in the Chinese economy and to a crowding out effect that domestic firms experience after the entry of foreign multinationals. On the whole the impact is, however, slightly positive for China, because manufactures benefit from the entry of foreign services multinationals. The rest of regions are unaffected or benefit very slightly, due to the fact that services production is less export oriented and more devoted to private consumption than in the case of manufactures. However, their manufacturing sectors are slightly harmed by the stronger Chinese competition. Many of them manage to more than offset this latter trend through higher exports or FDI in services directed to China., Ministerio de Economía y Competitividad (MINECO), Development and Reform Commission of Hunan Provinc of China, Depto. de Economía Aplicada, Estructura e Historia, Fac. de Ciencias Económicas y Empresariales, TRUE, pub

Purpose: The purpose of this paper is as follows: first, it aims to explain the overall economic implications of the trans-pacific partnership (TPP). Second, it aims to provide an in-depth analysis of the TPP’s quantitative impact on an upper-middle economy such as Mexico, as well as on the USA. Design/methodology/approach: The analysis is performed using a computable general equilibrium (CGE) model. Findings: The results suggest that in the short run, both Mexico and the USA would slightly benefit from the TPP. Tariff reductions would lead to less bilateral trade between Mexico and the USA and the stronger integration of both countries with the rest of the TPP members. The opposite is true after a decrease in non-tariff barriers (NTBs). Overall, in terms of the impact on Mexico, trade integration with the rest of the TPP members prevails. This suggests that a TPP without the USA could still be beneficial. Originality/value: Previous studies on the TPP have mainly focused on its impact for the USA, which is also analysed in the present study. The effects of the TPP are estimated for a broad set of micro and macroeconomic variables, paying particular attention to the reductions of NTBs., Ministerio de Economía y Competitividad (MINECO), Depto. de Economía Aplicada, Estructura e Historia, Fac. de Ciencias Económicas y Empresariales, TRUE, pub

We quantify the impacts of a sharp fall of Japanese foreign direct investment (FDI) to China that occurred after the worldwide financial crisis in 2009 using a three-region (Japan, China, and the rest of the world) recursive dynamic computable general equilibrium model with multinational enterprises (MNEs). The FDI fall would reduce exports and production of Japanese MNE affiliates in China and depreciate the Renminbi. This latter effect would favor Chinese manufacturing, but China, would not be a gainer, because it would experience a contraction in its service sector, which would exceed the gains in manufacturing., Ministerio de Economía y Competitividad (MINECO), JSPS Grant-in-Aid for Scientific Research, Depto. de Economía Aplicada, Estructura e Historia, Fac. de Ciencias Económicas y Empresariales, TRUE, pub

En este trabajo se comparan dos metodologías macroeconómicas punteras pero a la vez muy distintas: el modelo DSGE con expectativas racionales y el modelo de comportamiento con racionalidad limitada. Procedemos a ampliar los dos para incluir fricciones financieras por el lado de la oferta agregada. En ambos casos, los resultados apuntan a que la producción, la oferta de crédito y el pago anticipado a los productores de capital dependen en gran medida de los ciclos bursátiles. Durante las fases de optimismo, el crédito es abundante, hay facilidad de acceso al capital, existen pocas restricciones al pago por adelanto, los riesgos se infravaloran y se produce un boom en la producción. Sin embargo, cuando el clima de los mercados cambia, la contracción de todas estas variables se vuelve más profunda y asimétrica. Esto es aún más evidente en el modelo de comportamiento, en el que las limitaciones cognitivas de los agentes económicos generan una contracción aún mayor. Aunque ambos modelos captan correctamente las regularidades empíricas, los ejercicios de validación son incluso más favorables para el modelo de comportamiento, This paper compares two state-of-the-art but very distinct methods used in macroeconomics: rational-expectations DSGE and bounded rationality behavioural models. Both models are extended to include financial frictions on the supply side. The result in both frameworks is that production, supply of credit and the front payment to capital producers depend heavily on stock market cycles. During phases of optimism, credit is abundant, access to production capital is easy, the cash-in-advance constraint is lax, risks are undervalued, and production booms. But with a reversal in market sentiment, the contraction in all these parameters is deep and sometimes asymmetric. This is all the more evident in the behavioural model, where economic agents’ cognitive limitations exacerbate the contraction. While both models capture the empirical regularities very well, the validation exercise is even more favourable to the behavioural model

This paper discusses a tractable approach for computing the likelihood function of non-linear Dynamic Stochastic General Equilibrium (DSGE) models that are solved using second- and third order accurate approximations. By contrast to particle filters, no stochastic simulations are needed for the method here. The method here is, hence, much faster and it is thus suitable for the estimation of medium-scale models. The method assumes that the number of exogenous innovations equals the number of observables. Given an assumed vector of initial states, the exogenous innovations can thus recursively be inferred from the observables. This easily allows to compute the likelihood function. Initial states and model parameters are estimated by maximizing the likelihood function. Numerical examples suggest that the method provides reliable estimates of model parameters and of latent state variables, even for highly non-linear economies with big shocks., info:eu-repo/semantics/published

This study aims to analyze the impact of ASEAN Economic Community implementation in 2015 on the competitiveness of Indonesian textile and textile products industry. It uses simulations with the GTAP model to answer the proposed research questions. The GTAP simulation results suggest that Indonesian textile industry would gain the largest trade surplus followed by Thailand and Malaysia. For apparel, Vietnam would benefit the most, followed by Indonesia and Thailand. The ratio of domestic to import prices analysis suggests that Indonesian textile products have higher competitiveness than the other ASEAN's. For the apparel products, Indonesia is as competitive as both Malaysia and the Philippines.

info:eu-repo/semantics/published

This paper develops a novel approach for estimating latent state variables of Dynamic Stochastic General Equilibrium (DSGE) models that are solved using a second-order accurate approximation. I apply the Kalman filter to a state-space representation of the second-order solution based on the ‘pruning’ scheme of Kim, Kim, Schaumburg and Sims (2008). By contrast to particle filters, no stochastic simulations are needed for the filter here--the present method is thus much faster. In Monte Carlo experiments, the filter here generates more accurate estimates of latent state variables than the standard particle filter. The present filter is also more accurate than a conventional Kalman filter that treats the linearized model as the true data generating process. Due to its high speed, the filter presented here is suited for the estimation of model parameters; a quasi-maximum likelihood procedure can be used for that purpose., info:eu-repo/semantics/published

This paper shows a chronological survey of dynamic stochastic general equilibrium (DSGE) models from 1995 until 2011 developed to Colombian economy. The DSGE models follows the stream of new neo Keynesian models which includes intertemporal optimization, rational expectations, imperfect competence, adjust prices cost and rigidities; but still it is missing heterogeneity in consumers and bounded rationality. These models are dynamic because all decisions are intertemporal and stochastic due to include perturbations with uncertainty which affect continually to economy. In Colombia almost all these models have been designed to evaluate and forecast monetary policies, issues like fiscal policy, labor market and informality have yet to be fully explored., Este documento presenta una revisión cronológica de los Modelos de Equilibrio General Dinámicos y Estocásticos (DSGE) desde 1995 hasta el 2011 desarrollados para la economía colombiana. Los modelos DSGE siguen la corriente de los nuevos modelos neo keynesianos y neoclásicos que se caracterizan por incluir optimización intertemporal, expectativas racionales, competencia imperfecta, costos de ajuste de precios y rigideces; pero aún les falta por incluir temas como la heterogeneidad en los consumidores y racionalidad limitada. Estos modelos son dinámicos por cuanto todas las decisiones que toman los agentes se consideran intertemporales y son estocásticos porque incorporan perturbaciones con incertidumbre que afectan de manera continua a la economía. En Colombia la mayoría de estos modelos se han diseñado para evaluar y pronosticar políticas monetarias, aun falta por desarrollar modelos que cubran mejor las políticas fiscales, el mercado y la informalidad laboral.

Using a computable general equilibrium model, calibrated for Colombia, it is analyze theimpact of various economic policies, which affect the relative price of production factors.The results concluded that the incentives for investment, which can be interpreted asactions that decrease the cost of capital, however lead to the accumulation of capital,and thereby increase the productivity of labour, generating net positive effects onemployment. The Elimination of the payroll taxes, for its part, generates a reduction inthe cost of labour, but their overall effect on employment is partially offset by the taxmeasures designed to generate alternative income to keep the benefits associated withthese contributions. Finally the suggestion is that the ideal scheme would be one thatprovides incentives for investment, focused towards employment-intensive sectors, atthe time that creates networks of social protection appropriate to deal with the problemsassociated with poverty., Mediante un modelo de equilibrio general computable, calibrado para Colombia, se analiza el impacto de diversas políticas económicas, que afectan el precio relativo de los factores productivos. Se concluye que los estímulos a la inversión, que pueden interpretarse como acciones que disminuyen el precio del capital, propician sin embargo la acumulación de capital, y por esa vía, incrementan la productividad del trabajo, generando efectos positivos netos sobre el empleo. La eliminación de los aportes parafiscales, por su parte, genera una reducción en el costo del trabajo, pero su efecto global sobre el empleo es compensado parcialmente por las acciones fiscales tendientes a generar rentas alternativas que permitan mantener los beneficios asociados a esos aportes. Se sugiere que el esquema ideal sería aquel que establece estímulos a la inversión, focalizados hacia sectores intensivos en empleo, al tiempo que crea redes de protección social adecuadas, para enfrentar los problemas asociados a la pobreza.

This paper develops a novel approach for estimating latent state variables of Dynamic Stochastic General Equilibrium (DSGE) models that are solved using a second-order accurate approximation. I apply the Kalman filter to a state-space representation of the second-order solution based on the ‘pruning’ scheme of Kim, Kim, Schaumburg and Sims (2008). By contrast to particle filters, no stochastic simulations are needed for the filter here--the present method is thus much faster. In Monte Carlo experiments, the filter here generates more accurate estimates of latent state variables than the standard particle filter. The present filter is also more accurate than a conventional Kalman filter that treats the linearized model as the true data generating process. Due to its high speed, the filter presented here is suited for the estimation of model parameters; a quasi-maximum likelihood procedure can be used for that purpose., info:eu-repo/semantics/published

info:eu-repo/semantics/published

Unlike in Asia, the manufacturing sector has not (yet) become a driver of structural change in Africa. One common explanation is that the natural resource-focus of many African economies leads to Dutch disease effects. To test this argument for the case of newly found oil in Ghana we develop a multi-sector intertemporal general equilibrium model with endogenous savings and investment behavior. Results show that in addition to the well-known short-term Dutch disease effects, long-term structural effects can indeed impede Asian-style economic transformation in Ghana (and other resource rich countries). We also demonstrate how oil wealth may go hand in hand with structural change in the future.

This paper proposes a new tool to assess sustainability and make the concept of sustainable development operational. It considers its multi-dimensional structure combining the information deriving from a selection of relevant sustainability indicators belonging to economic, social and environmental pillars. It reproduces the dynamics of these indicators over time and countries. Then, it aggregates these indicators using a new approach based on Choquet's integrals. The main novelties of this approach are indeed: (i) the modelling framework, a recursive-dynamic computable general equilibrium used to calculate the evolution of all indicators over time throughout the world, and (ii) the aggregation methodology to reconcile them in one aggregate index to measure overall sustainability. The former allows capturing the sector and regional interactions and higher-order effects driven by background assumptions on relevant variables to depict future scenarios. The latter makes it possible to compare sustainability performances, under alternative scenarios, across countries and over time. Main results show that the current sustainability at world level differs from what the traditional measure of well-being, the GDP, depicts, highlighting the trade-offs among different components of sustainability. Moreover, in the next decade a slight decrease in world sustainability may occur, in spite of an expected increase in world domestic product. Finally, dedicated policies increase overall sustainability, showing that social and environmental benefits may be greater than the correlated economic costs.

En este trabajo se ilustran los efectos de distintas medidas de consolidación fiscal sobre la actividad económica mediante simulaciones realizadas con un modelo de equilibrio general calibrado para la economía española. Los resultados muestran que, con carácter general, el proceso de consolidación fiscal tiene un coste en términos de crecimiento en el corto plazo pero beneficios significativos en el largo plazo. En relación con la magnitud del impacto en el corto plazo, este depende crucialmente de la presencia de efectos confianza derivados del proceso de consolidación, que tiende a reducir el valor de los multiplicadores, This study illustrates the effects of different fiscal consolidation measures on economic activity through simulations performed with a general equilibrium model calibrated to the Spanish economy. Overall, our results show that fiscal consolidation has short-run costs but sizable long-run benefits in terms of growth. Regarding the short-run costs, their magnitude depends crucially on the presence of confidence effects due to the consolidation process, which tend to reduce the value of fiscal multipliers

Does GDP composition affect GDP growth and volatility? Typically, economies at advanced stages of development grow slower, are less volatile and have a larger share of services in GDP with respect to economies at middle stages. I propose a theory of development consistent with these three facts. I show that even when total factor productivity (TFP) growth and volatility are the same in manufacturing and services at the gross output level, the larger intensity of intermediate goods in gross output production in manufacturing implies a larger growth and volatility of TFP at the value added level in manufacturing than in services. As GDP is a weighted average of value added of the sectors in the economy, a larger share of services in the economy implies both a smaller GDP growth and a smaller GDP volatility. Numerical results suggest that along a transition path in which the share of services increases from 0.41 to 0.73, the same gross output TFP process in manufacturing and services implies a per-capita GDP growth and volatility 21% and 18% larger in the first part of the transition with respect to the second. These numbers represent 95% of the difference in per-capita GDP growth and 95% of the difference in per-capita GDP volatility between middle and high income economies during the 1970-2006 period. Also, the model can account for 58% of the per-capita GDP growth and 32% of the per-capita GDP volatility differences measured in the U.S. between the 1950-1978 and 1979-2007 periods

In this paper we construct a standard CGE model to explore the impact of scaling up infrastructure in an African country. As the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analyst raise concern on financing these infrastructures after construction and that external funding of these can create major distortion and have a negative impact on the trade balance of these countries. This study aims to provide so insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that foreign aid does produce Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed. Moreover, growth effects contribute to attenuate the negative effects., info:eu-repo/semantics/published

We propose a new numerical method to solve stochastic models that combines the parameterized expectations (PEA) and the Smolyak algorithms. This method is especially convenient to address problems with occasionally binding constraints (a feature inherited from PEA) and/or a large number of state variables (a feature inherited from Smolyak), i.e. DSGE models that incorporate portfolio problems and incomplete markets. We describe the proposed Smolyak-PEA algorithm in the context of a one-country stochastic neoclassical growth model and compare its accuracy with that of a standard PEA collocation algorithm. Despite estimating fewer parameters, the former is able to reach the high accuracy levels of the latter. We further illustrate the working of this algorithm in a two-country neoclassical model with incomplete markets and portfolio choice. Again, the Smolyak-PEA algorithm approximates the solution of the problem with a high degree of accuracy. Finally, we show how this algorithm can efficiently incorporate both occasionally binding constraints and a partial information approach

In this paper we construct a standard CGE model to explore the impact of scaling up infrastructure in an African country. As the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to African economies, some analyst raise concern on financing these infrastructures after construction and that external funding of these can create major distortion and have a negative impact on the trade balance of these countries. This study aims to provide so insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We compare various infrastructure investment funded with different fiscal tools. These investments scenarios are compared to non productive investment that can be interpreted as a business as usual scenario. Our results show that foreign aid does produce Dutch disease effects but the negative impacts are strongly dependent on the type of investments performed. Moreover, growth effects contribute to attenuate the negative effects., info:eu-repo/semantics/published

This paper analyses both global and regional approaches to solving problems of energy security and ecological imbalance by addressing specifically the problems of China's energy security. China's growing energy dependence has become a major concern for both economic and national security policymakers in that country. The ambitious goal of modernization of the economy along the lines of the other newly industrialized economies (NIEs) of Asia has succeeded only too well, and it is difficult to reorient economic priorities. If examined rigorously, such an economic strategic assumption can be seen to entail the goal of creating further technological capabilities. In particular, China seems to be firmly committed to the creation of a largely self-sustaining innovation system as part of a knowledge-based economy of the future. Such innovation systems, called positive feedback loop innovation systems or POLIS have been created by advanced countries, and NIEs such as South Korea and Taiwan are proceeding to create these as well. But this will add to its energy burden and further dependence on the US as the power which controls the key sea lanes. Only a strategic reorientation to building a self-sustaining POLIS and appropriate.

Using a CGE model, PRCGEM, with an updated 2002 I/O table, this paper explores how earnings will be affected in each of 40 separate industries across 31 regions (or 8 regional blocks) of China for the period 2002–07. Labour movement between regions within China is considered. It is found that the direct contribution of WTO membership is small to the whole economy in terms of growth and development. Real GDP will rise only 6.48 per cent (5.6 per cent) in the pure WTO short-run (long-run) shock. Full economic structure change besides WTO shock makes regional output better-off, especially the coastal regions where the economies are well established. Regional labour movement increases by 69.2 per cent in the long-run closure of full economic structural change during the transition period. When regional labour movement is considered, it is found that the Gini coefficient is slightly decreased.

In a standard general equilibrium model it is assumed that there are no price restrictionsand that prices adjust infinitely fast to their equilibrium values. In this paper the set ofadmissible prices is allowed to be an arbitrary convex set. For such an arbitrary set it cannotbe guaranteed that there exists a constrained equilibrium satisfying the usual condition that aprice will be on its upper or lower bound in case of rationing. Therefore we introduce a moregeneral equilibrium concept, called Quantity Constrained Equilibrium (QCE). At such an equilibriumthe levels of supply and demand rationing are completely determined by the components of adirection in which the price system cannot be moved further without leaving the set of admissibleprices. When the set is compact, we show the existence of a connected set of QCEs, containing twotrivial no-trade equilibria. Moreover, the set contains for every commodity a generalized Drèzeequilibrium, being a QCE at which this commodity is not being rationed, and also a generalizedsupply-constrained equilibrium without demand rationing. We apply this main result to severalspecial cases, including the case of an unbounded set of admissible prices.