Agriculture Reference
In-Depth Information
4 See Liu et al. (1988) for the method adopted.
5 TI includes revenue from taxes on production, consumption, factor use and trade, all of
whch are accounted for n the orgnal GTAP model and database.
6 Prvate savng s derved as the dfference between dsposable ncome (
Y-T
) and
consumption expenditure, where real consumption is determined in a Keynesian reduced
form equaton that takes the form:
C = γr
δ
[Y-T]
μ
, where
r
s the real nterest rate.
7 Note that there s no allowance for nterregonal captal ownershp n the startng
equilibrium. At the outset, therefore, there are no factor service flows and the current
account s the same as the balance of trade.
8 By which it is meant that households can direct their savings to any region in the world
without impediment. Installed physical capital, however, remains immobile even between
sectors.
9 Before adding to the global pool, savings in each region is deflated using the regional
captal goods prce ndex and converted nto US$ at the ntal exchange rate. The global
investment allocation process, therefore, is made in real volume terms.
10 This investment relation is similar to Tobin's Q in the sense that the numerator depends
on expected future returns and the denomnator ndcates the current cost of captal
replacement.
11 Since the initial database (GTAP Version 5) incorporates no 'net income' or factor service
component in its current account, the initial equilibria must do likewise. This implies the
assumption that, although there are no interregional bond holdings initially, the shocks
mplemented cause nterregonal exchanges of bonds and hence a non-zero net ncome
flow in future current accounts not represented.
12 More precisely, since for the US
E=1
, there is one less (usually endogenous) variable. Where
nominal exchange rates are to be endogenous and nominal money supplies exogenous,
one additional variable must be made endogenous. This could, for example, be balanced
by making one price level exogenous, such as by having US monetary policy target the
change in the US CPI, PC.
13 The scope of monetary policy includes alterations in the rate at which official foreign
reserves are accumulated. When there are no capital controls, however, the perfect
captal moblty assumpton mples that changes n reserves have no effect on net
capital account flows. Where they are important is in the case where capital controls
are effectve. Because the manpulaton of reserves offers only a short-term approach
to exchange rate management that is only available if reserves are sufficient in the first
place, DR is held exogenous throughout the analysis.
14 Detaled descrptons of the GTAP database's content and sources as they relate to Chna
are available in Gehlhar (2002) who describes the integration of the data for Hong Kong
with that of the mainland and discusses the entrepot nature of some of Hong Kong's
trade.
15 See Liu et al. (1998) for the method adopted.
