Sensitivity Analysis for Multiregional General Equilibrium Models

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Main results of this research project is summarized as follows :1. We have adopted Matheisen's approach as a basic model for formulating of computable general equilibrium in regional economy, where a complemetarity formulation is applied to describe interaction of various economic activities. We have then extended Mathiesen's model to include interregional trade pattern so that the model can deal with economic evaluations arising from the improvements of transportation services. We have also proved that our SCGE model has no unique solution. That property is an essential for calibrating the model-parameters to the given benchmark equilibrium conditions.2. Several types of sensitivity analyses are discussed in the research ; Analytical approach (e.g. comparative static analysis), Johansen' linear approximation approach, nonlinear sensitivity approach and the decomposition approach. We have derived analytical solution for Harberger's two sector model to see the effects of changes in tax … More rate. This kind of excise is very instructive for developing of computation algorithm like nonlinear sensitivity analysis. Johansen's approach is essentially the same as the nonlinear sensitivity approach ; however, it is important to note that Johansen's model can deal with %variation in exogenously given policy-oriented variables. We develop the decomposition approach where the total production growth in regional economy is partitioned into several different parametric effects such as transportation effects, production technology effects and final demand effects.3. As our model is formulated with a mixed complementarily problem, efficient computation procedures that have been recently developed can be applied, in which local convergence properties are proved. We checked the convergence properties for those procedures, and observed that Jacobian matrix obtained in calculation process is easily used for the purpose of sensitivity analysis.4. We have developed several kinds of program packages ; Visual Basic programming languages linked with Excel, FORTRAN programming language for Newton type algorithm and GAMS language for a mixed complementarity formulation. In Excel programming, we have used Fisher's merit function for solving a complemetarity model formulation. The Excel is quite suitable and efficient for small scale regional economy, thus, we can prove the economic equilibrium conditions corresponding to characteristics of regional economic environments and examine the effects of changes in exogenously given policy-variables. Less