A GTAP Historical Simulation from 2004 to 2014

Peter Dixon and Maureen Rimmer

No 333258, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper describes an historical simulation with GTAP connecting the databases for 2004 and 2014. These databases stand up well to rigorous historical interrogation. In most cases the comparison of item x in the 2004 and 2014 databases were plausible, as was GTAP’s parameter settings. A problem in GTAP was that some of the industries were too heterogeneous, e.g. Other mineral products. To absorb quantity and value movements for commodity outputs, we added preference/technology and demand-shift variables to GTAP, and then endogenized them. This worked satisfactorily. We found absorbing macro information on movements in real exchange rates more difficult. We needed to rely heavily on the Balassa-Samuelson mechanism. This left us with seemingly quite extreme movements for some regions in productivity for industries producing non-traded commodities relative to those producing traded commodities. Historical simulation is a step-by-step process. At each step we add data items, change the closure, compute a solution, check and interpret results, and plan the next step. After 15 steps we produced robust results for 2004 to 2014 in worldwide preference/technology shifts at the GTAP commodity level. We found: shifts against the use of natural fibres in the production of Textiles; shifts against Forestry and Paper & paper products; a shift against Coal and shifts in favor of Oil and Gas; a shift against Petroleum consistent with improved efficiency in cars and against Electricity consistent with improved efficiency of electrical equipment; shifts against direct consumption of most farm products in favor of consumption of processed food products; and shifts in favor of Apparel, Leather products, Motor vehicles, Electronic equipment, Air transport and Financial intermediation. Including extrapolated versions of these shifts in a baseline simulation causes a radical change in the projected picture for the industrial composition of output in each country.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333258

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