© Scott McDonald, Karen Thierfelder & Terrie Walmsley (2013)
GLOBE 1 is a ‘standard’ global CGE model that is been calibrated using data derived from the GTAP database. The model is a direct descendant of an early US Department of Agriculture model. The model also owes a lot to the development of the SAM approach to national accounting and the SAM approach to modelling.
The underlying approach to multi-region modelling for this CGE model is the construction of a series of single country CGE models that are linked through their trading relationships. Consequently each region in the model has its own numéraire price and a nominal exchange rate, while the model as a whole requires a numéraire. As such this model contains a fundamentally different philosophical approach to global modelling to that found in the GTAP model.
Trade is modelled using nested CES (imports) and CET (exports) functions with an adaptation to mitigate the impacts of small trade shares. Production is modelled using nested CES functions. The tax instruments are those in GTAP plus direct (income) taxes on the households who also save.
A distinctive feature of the model is the use of a 'dummy' region, known as Globe, that allows for the recording of inter regional transactions where either the source or destination are not identified. The Globe construct provides a general method for dealing with any transactions data where full bilateral information are missing.