Introducing Intertemporal and Open Economy Features in Applied GeneralEquilibrium Models

摘要

The paper deals with recent developments of computable general equilibrium (CGE)models along two important dimensions: (1) the incorporation of intertemporal aspects of decision-making, and (2) the treatment of international capital flows. It discusses the significance of these two dimensions for policy evaluation and indicates how they can be incorporated in applied models. The paper points out some recent CGE models which have started to emphasize intertemporal issues and international capital movements and considers the significance of these developments. It then discusses several practical issues concerning the implementation of intertemporal decision-making and international capital flows in CGE models. It goes on to illustrate how the issues are addressed in a specific model. The model features a rigorous treatment of intertemporal decision-making and explicitly distinguishes between international movements of physical and financial capital. The final section provides conclusions.