Can the Post-COVID FDI Boost the Indian Economy?

Ever since the liberation of trade policies in India, Foreign Direct Investments (FDI) has been crucial in the growth of the economy, both at the macro as well as sector level. The association between FDI and economic growth is an area of interest globally. The investment decisions are affected by several national and international events that add to the volatility of the number of inflows. COVID-19 pandemic severely impacted the intensity of FDI inflows. But the strong resilience by our government manifested in crucial policy reforms and proactive decision-making minimized the impact. This article examines the potential impact of FDI on crucial macroeconomic variables using the Computable General Equilibrium (CGE) Model. Introducing the policy shock of $90 billion into the model, an increase of 5.68% per annum in GDP is estimated. Findings indicate that the impact of FDI shall be favourable to a large number of sectors mainly metals, construction, motor vehicle, computers, and electronics in terms of increased output, exports, and employment opportunities. The study offers logical implications for the policymakers to continue strengthening their moves to attract FDI.

Research on the Trust Mechanism of Individual Consumers in Rural Financial Markets Based on the Dynamic CGE Model

In order to obtain the complete equilibrium state of rural financial market and ensure the stable development of rural financial consumer market, this paper introduces CGE model and analyzes the dynamic trust mechanism of individual consumers in rural financial market. In this paper, the single variable evolutionary fuzzy clustering algorithm is used to analyze the orthogonal eigenvector solutions of individual consumers; the big data of individual consumers under the mode of perceived trust is automatically clustered, so as to obtain the fuzzy analogy function of individual consumers in the rural financial market; and finally the prediction value of consumer trust is obtained. The results show that trust, customer satisfaction, and service quality are positively correlated. Under the same sample expectation constraints, the dynamic CGE model is more robust, and the individual consumer trust mechanism of rural financial market in the study area has higher advantages.

Regional responses to macroeconomic and regional policy in Poland

PurposeThe purpose of this paper is to investigate regional impact of macroeconomic and regional policy impulses, using our newly developed multi-regional computable general equilibrium (CGE) model for three, structurally distinctive Polish macro-regions.Design/methodology/approachIn this study, we build an interregional social accounting matrix for Poland and use it to develop a small scale, three-region CGE model, reflecting the size of regional economies and cross-regional differences in industrial structures, while also explicitly accounting for the dynamics of main economic relationships across regions, such as interregional flows in commodities, labor and capital. The model is subsequently use to simulate regional effects of various policy impulses.FindingsWe demonstrate important cross-regional differences in the transmission mechanism of macro-level policies, which either affect regional output and its individual components (as in the case of imposing shocks to VAT or PIT rates) or are limited to the components, while preserving a rather uniform impact on output (as in the case of imposing shocks to wages). Furthermore, we contribute to the regional policy equity-efficiency trade-off debate, by illustrating quantitatively how, due to structural differences, spatially targeted expenditure measures might promote either regional convergence or aggregate output growth at the country-level.Originality/valuePrior to our study, regional CGE models have not been used to simulate spatial distribution of aggregate shocks in Poland or in any other CEE country. Another originality of our study lies in comprehensive evaluation of various policy impulses, from the perspective of their impact on the respective region, spillovers to the other regions and its overall, country-level effect.

DAMPAK SAFEGUARD ATAS IMPOR BENANG TERHADAP PEREKONOMIAN: PENDEKATAN MODEL CGE

ABSTRACT: The purpose of this study is to analyze the impact of safeguard on yarn industry’s output, textile and apparel industry as the upper stream’s output, and economics welfare. Government of Indonesia implement safeguard on yarn from 2019 to 2022, to protect domestic industries from an increased quantities as to cause or threaten serious injury to domestic producers of like or directly competitive products. This study uses computable general equilibrium (CGE) model incorporating Indonesia Input - Output Table year 2016. The study exercised two scenario/simulations:(1) assessing safeguard impact; and (2) assessing combination of safeguard and tax incentive impact. The results showed that safeguard on yarn import decrease import value of yarn, but did not increase yarn’s and its upper stream industry’s output. Safeguard tend to decrease the utility or welfare of the economics. In the other hand, policy combination of safeguard and tax incentive decrease yarn import, but did not impact on upper stream industry’s import. The policy combination also increases yarn industry’s output, and increase the utility or welfare of the economics. Keywords: compensating variation, fiscal incentive, textile and apparel industry, utility, welfare ABSTRAK: Penelitian ini bertujuan menganalisis dampak safeguard terhadap produktivitas atau output industri benang dan industri tekstil dan produk tekstil sebagai industri hilir, serta dampak safeguard terhadap kesejahteraan masyarakat dalam perekonomian. Pemerintah Indonesia menerapkan safeguard atas benang pada tahun 2019 s.d. 2022 sebagai bentuk perlindungan terhadap industri tekstil dalam negeri dari peningkatan impor benang yang menyebabkan, atau dicurigai akan mengakibatkan kerugian serius terhadap industri yang bersangkutan. Penelitian menggunakan computable general equilibrium (CGE) model dengan data Tabel I-O Indonesia tahun 2016. Pengujian dilakukan dalam dua simulasi yaitu: (1) shock berupa penerapan safeguard; (2) kombinasi dari shock berupa penerapan safeguard dan fasilitas fiskal berupa pengurangan penghasilan industri untuk perhitungan pajak penghasilan wajib pajak Badan. Hasil pengujian menunjukkan bahwa safeguard menurunkan impor benang, tetapi tidak meningkatkan output domestik dan cenderung menurunkan utilitas/kesejahteraan masyarakat. Safeguard yang dikombinasikan dengan fasilitas pajak penghasilan mampu menurunkan impor, meningkatkan output (walaupun belum sampai tahap ekspor), dan meningkatkan utilitas/kesejahteraan masyarakat. Kata kunci: compensating variation, industri tekstil dan produk tekstil, fiscal incentive, utilitas, kesejahteraan

A Multi-Regional Computable General Equilibrium Model for New Zealand

<p>Although New Zealand has had an active CGE modelling community since the 1980's, a multi-regional CGE model for the country has not been developed until now. This thesis presents a prototype multi-regional CGE model to demonstrate the feasibility of developing a comprehensive model that captures the benefits of modelling agent behaviour with a bottom-up approach. The prototype model is built upon bottom-up regional micro-foundations and New Zealand data is used to operationalise a particular implementation of the model. The thesis fills an important gap in the New Zealand CGE modelling literature as none of the models in current use have a structure involving bottom-up regional modelling. The method of implementation is also a key contribution, utilising a maximum-entropy approach to overcome data shortages. An illustrative simulation of a natural disaster that strikes the Wellington central business district demonstrates the strengths of the bottom-up multi-regional approach - that the model can capture differential effects across regions of shocks that occur at the regional level, and incorporate flow-on and feedback effects between regions. Sensitivity testing of the substitution elasticity between domestic sources of products reinforces the importance of empirically-estimated parameters in CGE models. The basic model is extended in two ways. The first is to introduce modelling of distribution services as has been done in the ORANI and subsequently FEDERAL models. The key structural difference here is that products identified as distribution services are required to facilitate movement of other products from seller to buyer. Thus there are no opportunities to substitute away from these services if they become relatively more expensive. To implement the additional structure, sets of coefficients are specified to control technical possibilities in the usage of the distribution services. These include switches that can dictate, for example, that wholesale trade is only involved in the delivery of tangible products, that retail trade is only used by in-region purchasers, and that transport is required for moving physical products across regional borders or to exporters. That these assumptions can be integrated seamlessly into the database highlights the strength of the maximum-entropy approach used to generate the multi-regional input-output database. Simulations of an oil price shock show that the regional assumptions surrounding the distribution networks are material to the results. The second extension to the model is the addition of a module to control the degree of inter-regional labour mobility. Essentially the user is given the ability to specify the extent to which households respond to regional real wage di erences by moving to regions with relatively higher rates. Therefore, in short-run simulations labour can be made more mobile than capital, while in the long-run it can be less mobile than capital. The module also introduces additional structure to link populations, households, and labour market components. One important element of this new structure is a link back to the endogenous labour supply theory of the basic model. Publicly available demographic and labour market data are used to implement the mobility module. The importance of a mobility response to relative real wage changes is explored in an illustrative application looking at the impact of regionally-concentrated immigration flows. The simulations suggest that population movements can work to dissipate the welfare effects of such migration inflows.</p>

A Multi-Regional Computable General Equilibrium Model for New Zealand

<p>Although New Zealand has had an active CGE modelling community since the 1980's, a multi-regional CGE model for the country has not been developed until now. This thesis presents a prototype multi-regional CGE model to demonstrate the feasibility of developing a comprehensive model that captures the benefits of modelling agent behaviour with a bottom-up approach. The prototype model is built upon bottom-up regional micro-foundations and New Zealand data is used to operationalise a particular implementation of the model. The thesis fills an important gap in the New Zealand CGE modelling literature as none of the models in current use have a structure involving bottom-up regional modelling. The method of implementation is also a key contribution, utilising a maximum-entropy approach to overcome data shortages. An illustrative simulation of a natural disaster that strikes the Wellington central business district demonstrates the strengths of the bottom-up multi-regional approach - that the model can capture differential effects across regions of shocks that occur at the regional level, and incorporate flow-on and feedback effects between regions. Sensitivity testing of the substitution elasticity between domestic sources of products reinforces the importance of empirically-estimated parameters in CGE models. The basic model is extended in two ways. The first is to introduce modelling of distribution services as has been done in the ORANI and subsequently FEDERAL models. The key structural difference here is that products identified as distribution services are required to facilitate movement of other products from seller to buyer. Thus there are no opportunities to substitute away from these services if they become relatively more expensive. To implement the additional structure, sets of coefficients are specified to control technical possibilities in the usage of the distribution services. These include switches that can dictate, for example, that wholesale trade is only involved in the delivery of tangible products, that retail trade is only used by in-region purchasers, and that transport is required for moving physical products across regional borders or to exporters. That these assumptions can be integrated seamlessly into the database highlights the strength of the maximum-entropy approach used to generate the multi-regional input-output database. Simulations of an oil price shock show that the regional assumptions surrounding the distribution networks are material to the results. The second extension to the model is the addition of a module to control the degree of inter-regional labour mobility. Essentially the user is given the ability to specify the extent to which households respond to regional real wage di erences by moving to regions with relatively higher rates. Therefore, in short-run simulations labour can be made more mobile than capital, while in the long-run it can be less mobile than capital. The module also introduces additional structure to link populations, households, and labour market components. One important element of this new structure is a link back to the endogenous labour supply theory of the basic model. Publicly available demographic and labour market data are used to implement the mobility module. The importance of a mobility response to relative real wage changes is explored in an illustrative application looking at the impact of regionally-concentrated immigration flows. The simulations suggest that population movements can work to dissipate the welfare effects of such migration inflows.</p>

The RHOMOLO Spatial CGE Model

This chapter provides a description of the RHOMOLO model, a Spatial CGE model, developed and used by the European Commission for the impact assessment of policies at the regional level. Special emphasis is put on the innovation mechanisms underlying the model. Moreover, it discusses the scenarios simulated and the findings from the economic impact assessment of the Horizon Europe Framework Program.

Achieving a high share of non-hydro renewable integration in Brazil through wind power: regional growth and employment effects

In this policy brief we investigate the wind power development in Brazil and its effects on employment and regional growth. Using the CGE model TERM-BR10, we estimate that in the absence of the policy framework that supported wind power expansion there would have been a GDP loss of 0.15% nationally and of 1.1% in the Northeast region (which concentrates over 90% of wind installed capacity), with negative impacts to labour market mostly over skilled jobs.