Long Run Simulations of GTAP: Initial Results for APEC in a Horridge-Style Closure

In static applied general equilibrium models, the exogenous/endogenous split between variables or closure is used to alter the time frame over which the effects of a shock are simulated. Currently, the Global Trade Analysis Project (GTAP) Model (Hertel and Tsigas, 1997) has two closures: a short run and a medium run closure. This paper introduces a simple long run closure for the GTAP model and uses this closure to simulate and compare the short, medium and long run effects of Asia-Pacific Trade Liberalisation. As well 'isolation closures' are defined which allows the change in a region's terms of trade to be partitioned into a component due to changed external trading conditions and a component due to that region's endogenous reaction to these conditions.