A Dynamic CGE Model: An Application of R&D- Based Endogenous Growth Model Theory
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An R&D based endogenous growth - applied general equilibrium model is developed from
an underlying analytical model which combines Romer's capital variety with Grossman and
Helpman's multi-sector open economy model. The transitional dynamics of the analytical model
are derived. For numerical implementation, a time discrete empirical model, with an Armington
structure, is fit to East Asian data of the social accounting matrix variety. Simulations of trade
reform are performed and their static and dynamic effects compared. The transition paths of
the state variables are found to have a half-life of five to six periods. A solution of the Social
Planner's problem, and interventions which seek to obtain this outcome from the decentralized
model are also obtained'.