A dynamic computable general equilibrium model with working capital for Honduras

Samuel Morley, Piñeiro, Valeria and Sherman Robinson
Authors registered in the RePEc Author Service: Valeria Piñeiro ()

No 1130, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: In this paper we develop a dynamic real-financial computable general equilibrium (CGE) model for Honduras that incorporates working capital. The model is designed to be useful as a development tool and to be used by policymakers who deal with short-run macro and trade issues. Our model extends previous modeling work on Honduras in several ways. First, it uses a new, updated social accounting matrix (SAM) for the country. Second, it is a recursive dynamic model that incorporates unemployment of labor in the short run. Most CGE models are not useful for short-run analysis because they are comparative static models that assume full employment. We specify a fixed minimum wage and an informal sector and use a recursive dynamic framework to solve for the short-run adjustment process that occurs as the economy responds to shocks. Finally, the model introduces working capital as an additional factor of production, complementary to physical capital, which allows us to examine the impact of monetary shocks that affect the supply of credit on the balance of payments, employment, and real income during periods of adjustment.

Keywords: CGE models; economic growth; working capital; Computable general equilibrium (CGE) modeling (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cmp and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:fpr:ifprid:1130

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