From recursive-dynamic to forward-looking: The importance of allowing for intertemporal investment and net trade adjustments

Matthias Weitzel, Edward Balistreri and Xiaolin Ren

No 332779, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: Many CGE models analyzing the cost of climate policies are recursive dynamic in order to take into account much sectoral and regional detail. Introducing forward looking behavior might be preferable from a theoretical perspective because it allows agents to endogenously adjust intertemporal investment and trade decisions, however, this comes at computational cost. Here we present three versions of the same model (forward looking, recursive dynamic, and an intermediate case which only restricts intertemporal trade decisions) and compare outcomes for exemplary climate policies. Limiting intertemporal adjustments makes climate policy more costly. Preliminary results suggest that the intertemporal adjustments via trade are more important than adjustments via investment decisions if the baseline starts from a first best capital path, but that might depend on the type of policy to be implemented.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/332779/files/8100.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:332779

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 ().