New Household Saving Behavior in the Dynamic GTAP model

Alla Golub and Robert McDougall

No 331550, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: In the dynamic GTAP model (GTAP-Dyn) saving is a fixed proportion of income in each region. There are two unwelcome implications of this. First, net foreign positions grow without bound in GTAP-Dyn simulations. The second problem is that as economies with high savings rates, like China, grow, there is a glut of global savings and, as a result, of investment and capital in the world. Because of excessive investment, rates of return to capital fall without bound. This paper documents new household saving behavior in the dynamic GTAP model. In this work we adopt very practical approach motivated by the stylized fact that gross foreign assets and liabilities do not diverge through time in reality nearly as much as in standard GTAP-Dyn. We modify the theoretical structure of the GTAP-Dyn so that the saving rate in each region is endogenous and is a function of the ratio of wealth to income. New theoretical structure supports balanced growth scenarios, stabilizes global rate of return to capital, and prevents net external assets or liabilities from growing implausibly large.

Keywords: Research Methods/ Statistical Methods; Consumer/Household Economics (search for similar items in EconPapers)
Pages: 38
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/331550/files/3448.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331550

Access Statistics for this paper

More papers in Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().