Forward Looking Dynamics In Spatial Cge Modelling

Decisive for the ability of the SCGE models to bring forward new insights about the effects of policies is the incorporation of the fundamental principles of regional and spatial economics: factor mobility, economies of scale, and the presence of transport costs. [...] A useful corollary of this theorem is that the stable subspace of the linearized system is the best affine approximation to the stable manifold of the nonlinear system around the steady state. [...] The default value of the parameter of the adjustment cost function ζ is chosen taking ac- count of the implications for the value of the Tobin’s Q and the convergence speed. [...] The initial divergence in the regional values of the Tobin’s Q illustrates the change in the relative attractiveness of the regions for investment, with the region untouched by the infrastructure improvement being a clear loser. [...] The larger the adjustment of consumption during the initial jump, and the faster the convergence, the more close will the two measures be to each other.