Climate policy and trade: Dynamics and the steady-state assumption in a multi-regional framework

Katrin Springer

No 952, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Most dynamic trade models assume steady state or balanced growth. This paper argues while this can be done in a single region model or a model without trade, the steady state assumption is problematic in a multi-regional setting with trade interactions. This paper shows the consequences of assuming a balanced growth path and discusses several problems which are connected to the calibration of recursive dynamic multi-regional trade models. Furthermore, it is demonstrated how different dynamic specifications of the base run path affect the results of a policy scenario by imposing the Kyoto Protocol. The simulations illustrate that a balanced growth path can not be maintained in a multi-regional trade model due to international trade spill-overs. It is shown that the model results and thus the assessment of climate policy options depend substantially on the dynamic specification.

Keywords: Growth of open economies; Steady-state; Multi-regional dynamic CGE Model; International environmental problems (search for similar items in EconPapers)
JEL-codes: C68 D58 F43 O41 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:952

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