Macro Closure

Nobuhiro Hosoe, Kenji Gasawa and Hideo Hashimoto

Chapter 7 in Textbook of Computable General Equilibrium Modelling, 2010, pp 122-127 from Palgrave Macmillan

Abstract: Abstract Any empirical model depicts only part of the real economy; thus, it has a borderline distinguishing between the ‘inside’ of the model, which is represented by endogenous variables, and the ‘outside’, which is assumed to be given. In the ‘simple CGE model’ developed in Chapter 2, the supply of primary factors is assumed to be exogenously constrained by their endowments FF h . Instead, their supply can be endogenized with a factor supply function. For example, we can incorporate consumption of time as leisure in the household utility function to generate voluntary unemployment or an inflow of foreign labour. In principle, we can freely set a borderline delineating the endogenous part from the exogenous part of the model, considering the purpose of the analysis with insights into the actual economic phenomena.

Keywords: Current Account; Real Exchange Rate; Endogenous Variable; Nominal Exchange Rate; Domestic Investment (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1057/9780230281653_7

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