Recursive Dynamic Model - RunDynam
overview
main purpose
summary
Together with the GTAP database, Rundynam can be used to simulate different trade policy scenarios for more than 140 countries/regions and for around 65 sectors (agriculture, food, manufacturing and services).These tools allow to evaluate the impact in terms of export, import, GDP and sectoral output.
Rundynam is a model developed in the Center for Global Trade Analysis, at the Purdue University. It is a global network of researchers and policymakers conducting quantitative analysis of international policy issues. It also develops collaboration among academia, public sector and private sectors worldwide.
The use of economic models, like RunDynam, helps policy making with an economic theoretically consistent framework for analyzing trade policy questions. These types of models help to answer 'what if…' questions by simulating the price, income and substitution effects of different policy changes and comparing them to a so-called baseline (i.e., what would happen without a policy change). The baseline is key as it is the counterfactual against which the economic outcome of the initiative is assessed. Hence, CGE models allow economists to simulate, at the same time, how all sectors and actors adjust to the changes to costs, prices and/or incentives that a trade policy change would cause. This allows for an ex-ante assessment of all the direct and indirect effects of changes to trade policy. Usually, model results regard change in GDP, import and export flows, sectoral output, resources reallocation and price effect.
RunDynam, and similar models, are widely applied for providing the economic impact assessment of a trade policy agreement. The main advantage of CGE models is that they analyse the effects of trade policy taking into account the main links between the domestic and international production of goods and services.
model type
ownership
licence
- Licence type
- Non-Free Software licence
details on model structure and approach
RunDynam is a recursively dynamic applied general equilibrium model of the world economy and is built upon the Social Accounting Matrices (SAMs) of individual countries and regions. This model extends the comparative static framework of the standard GTAP model developed by Hertel (1997) to a dynamic framework by incorporating international capital mobility and capital accumulation, while preserving all the features of the standard GTAP, such as constant returns to production technology, perfectly competitive markets and product differentiation by countries of origin – the so-called Armington assumption. RunDynam allows constructing a baseline (which may be a forecast) and policy deviations from the baseline. Users can view the results of the base case or policy deviation on the screen or export them to other programs. The model allows to simulate trade measure change, like tariffs cuts, in order to analyze the possible trade creation and trade deviation.
RunDynam relies on the Global Trade Analysis Project (GTAP). GTAP is a global network of researchers and policy makers conducting quantitative analysis of international policy issues. GTAP's goal is to improve the quality of quantitative analysis of global economic issues within an economy-wide framework. The GTAP network provides a global data base describing bilateral trade patterns, production, consumption and intermediate use of commodities and services. The latest version of the database, V10, refers to 2014 as reference year and covers 141 regions and 65 sectors (https://www.jgea.org/resources/jgea/ojs/index.php/jgea/article/view/77).
model inputs
The impact of a trade policy shock cannot be evaluated without a baseline i.e. the counterfactual situation in which the economy would have been should there have been no trade policy change. Creating a realistic baseline is as difficult as it is important. The Commission usually relies upon predictions about the future by others, such as short term projections on GDP growth from the IMF and longer term projections on e.g. population from the UN, but also on energy consumption, labour participation rates, etc.
model outputs
Output comes in the form of results on a wide range of indicators such as: (i) GDP or welfare (equivalent variation); (ii) Impact by sector in terms of exports, imports, production and value added reflecting inter -sectoral input -output links including sourcing of inputs (goods and services) from abroad; (iii) Impact on factors of production (land, capital and labour of various skill categories) in terms of e.g. wages and (iv) CO2 emissions, land use, etc.
model spatial-temporal resolution and extent
| Parameter | Description |
|---|---|
| Spatial Extent/Country Coverage | 141 regions |
| Spatial Resolution | World-regions (supranational)National |
| Temporal Extent | Short-term (from 1 to 5 years)Medium-term (5 to 15 years)Long-term (more than 15 years) Baseline 2014 |
| Temporal Resolution | Years |