Economic activity - AIM-Hub
|Institution||National Institute for Environmental Studies (NIES), Japan, .|
|Solution concept||General equilibrium (closed economy)|
The future macro-economic assumption also causes changes in the supply and demand of goods. The macroeconomic assumption is also an exogenous assumption. There are two ways of treatment of macroeconomic assumption differentiating between baseline and mitigation scenarios. In baseline scenario, GDP is assumed as exogenous. Instead, TFP is assumed as endogenous. Usually, the change in GDP is used for the macroeconomic assumption for future scenario simulation. However, the actual outcome from the model is not exactly the same as the assumptions. Therefore, the GDP assumption is used to calculate the total factor productivity (TFP), and this is a totally exogenous parameter of the model. In mitigation scenario, we use the TFP values which is calculated in baseline scenarios.