Course Time and Location:

Winter Session: November 6 - December 14
Economics Faculty Building
Time:             TBA
Office Hours: TBA

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Overview

The primary goal of this course is to provide course participants with the mathematical and computer skills required for building and analyzing large scale numerical equilibrium models. The main modeling focus for this course will be government policy analysis.

The subsidiary goals of the course include:

• Reinforce participants' understanding of the basic mathematical concepts which underly economic models, including linear algebra and calculus, Karush- Kuhn-Tucker conditions, weak and strong duality for linear programming
• Provide on-hands experience in the formulation of a range of optimization and equilibrium models,
• Develop facility with the GAMS programming language for data management, model formulation and analysis
• Provide participants with an understanding of the range of applications for which economic equilibrium methods have been applied in the study of public finance, tax-reform, international trade policy and environmental economics.
• Introduce participants to the data sources and economic structure of general equilibrium models which have been used for multi-regional trade policy analysis.

Prerequisites

This course is open to MS and Ph.D. students, government employees, and members of economics research institutes. All participants must have completed a graduate course in microecomic theory. In addition, participants are expected to be comfortable with the standard mathematical tools used in economics, specifically calculus, linear algebra and constrained optimization. If you are unsure whether you meet the prerequisites, please contact the course coordinator or the instructor.

Conduct of the Course

Participants must attend and participate in classes. Readings must be completed prior to associated lectures. The first half of the term will have a traditional lecture format with periodic reading assignments and problem sets. Class meetings during the second half of the term will devote time to student presentations of term papers and discussions of assigned journal articles. Communication skills, both written and oral, are an important part of how participants will be assessed.

Workload

One mid-term examination in the middle of the semester.

One research assignment with three components:

1. abstract, outline, and references,
2. first draft (evaluated only on form),
3. final draft (evaluated on the basis of form and content).

Final examination: two hours at time/date scheduled by the university.

Assessment

Class participation (10%)
Homework assignments (10%)
Annotated bibliography and outline (10%)
First draft (evaluated on form) (10%)
Final draft (evaluated on form and content ) (10%)
Midterm examination (20%)
Final examination (30%)

Books and Materials

GAMS User's Guide Brooke, Kendrick and Meeraus, Scientific Press (available in PDF form from http://www.gams.com, or in printed form for $10)

Global Trade Analysis: Modeling and Applications, Edited by Thomas W. Hertel, Cambridge University Press.

Convenient access to a PC, with GAMS, MPSGE, and all required utilities will be provided for this class. Participants are also encouraged to use their own computers for analysis.

Fully-licensed version of GAMS software will be provided without charge to enrolled students for the duration of the course. These copies are provided under special provisions by the GAMS corporation.

Students must be familiar with a programming editor such as JED, Emacs, or Epsilon.

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Topics of Study (about one per week)

Programming with GAMS

The structure of a simple GAMS program. Using a text editor. Reading data files. Writing data files. The display statement. Interpreting the listing file. Manipulate data, formulate a small model, interpret the results.

Nonlinear Programming and Nonlinear Complementarity Problems

Graphical introduction. Lagrange's method. KKT conditions. Using MINOS and CONOPT for solving nonlinear programs. Basic ideas in these algorithms. Solver options files. Interpreting run-time log output.
The NLP problem will be converted into a nonlinear complementarity problem.

General Equilibrium Modeling with MPSGE

This lecture sequence introduces a high-level language for applied general equilibrium analysis, MPSGE. The syntax and underlying functional forms will be investigated in detail.

Functional Forms in Equilibrium Modeling

Review of functional forms commonly adopted for applied work based on this theory. The emphasis here is on practical issues: how do we work with different types of functions, what are concise methods for representing these functions in GAMS, how can we compare the performance of different functional forms and how important is the choice of functional form for model results.

General Equilibrium Datasets and SAMs

This section begins with an introduction to social accounting. Programming topics focus on the use of GAMS for dataset aggregation and verification. Excercises will involve working with large-scale datasets and implementing a simple general equilibrium structure.

Modeling International Trade Agreements

We will examine regional trading agreements emphasizing the formulation and application of models based on the GTAP dataset.

Tax Reform and Government Policy

During this section, the theory of public taxation will be reviewed using MPSGE. Part of this section will emphasize skills in scenario management and presentation of results in a clear, consice manner.

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