Does the microsimulation approach used in macro–micro modelling matter? An application to the distributional effects of capital outflows during Argentina's Currency Board regime

We provide a novel comparison between the behavioural and the non-parametric microsimulation approach. Coupled with a CGE model, we consider the distributional effects of the significant capital outflows faced by the Argentinean economy at the end of its Currency Board, in a context with significant macroeconomic similarities to the present crisis in Greece. Both the relatively straightforward ‘non-parametric’ approach and the more complex behavioural approach lead to distributional results that are consistent with the data, suggesting that both are viable alternatives. Looking forward, it would be desirable for researchers to look for additional evidence regarding the distributional effects that these microsimulation models can illuminate for given macroeconomic shocks

A disaggregated and macro-consistent social accounting matrix for Pakistan

This paper provides future researchers of economic structure with a model for building a social accounting matrix (SAM), that is, a unique countrywide database for use in structural analysis, and applies this model to the empirical investigation of the economic structure of Pakistan. Our proposed approach to building SAMs is motivated by an information theoretic approach to estimation that takes a Bayesian view of the efficient use of information: 'Use all the information you have, but do not assume any information you do not have.' The methodology used to develop this SAM, unlike previous approaches, ensures that it is perfectly consistent with the national accounts. The SAM provides a high degree of detail on the economic structure of the country, with 51 sectors of activity, 27 factors of production, and 18 household groups, allowing the tracing of direct and indirect effects of potential scenarios through production and consumption linkages and the capture of distributional effects. Output multipliers in Pakistan, accounting for supply constraints, range from 1.1 to 1.4, and shocks to livestock and industry have the largest spillover effects. These shocks lead to income changes that differ significantly across domestic socioeconomic groups, a direct result of the heterogeneity in the generation of income of these groups that our countrywide database captures

Future Climate Scenarios for the Indus Basin

Examines the literature and available data on hydroclimatic variability and change on the Indus Basin plains, comparing historical fluctuations in climatic and hydrologic variables and reviewing scenarios of climate change derived from general circulation models (GCMs), including the generation of future scenarios of changing snow and ice melt in the Upper Indus Basin (IUB). Historical trends show statistically significant increasing temperatures and annual precipitation over the last century, and the general findings from a wide range of general circulation model (GCM) outputs show agreement among models regarding continued increases in temperature. Models regarding changes in precipitation (both in magnitude and direction) do not agree, but indicators do show a general trend in increased precipitation during the summer and a decrease during the winter, suggesting the primary impact on the UIB could be a shift in the timing of peak runoff and not a major change in annual volume

The Current Water and Agriculture Context, Challenges, and Policies

Surveys the current policy environment for addressing water and agricultural issues in a changing climate, which is shaped by economic development plans at the national and provincial levels, sector plans for water and agriculture (from long-term, multi-decade plans to medium-term, annual plans), and recent cross-cutting policy documents on climate change. Key challenges include (1) limited water storage, (2) problematic trends in surface water and groundwater use, (3) inflexible and uncertain water allocation institutions, and (4) low water-use efficiencies and productivity. Water and agricultural policy challenges arise as provincial development plans continue to focus on the role of infrastructure in water and food security. Recent policy documents highlight the increasing importance of improving irrigation efficiency, improvement of yields, and the socioeconomic distribution of development opportunities and benefits—including food security—but planning documents and budgets do not always comprehensively address the linkages between water management and productivity of the agriculture sector

Sensitivity and Scenario Results

Presents the results of various scenarios using models used to study water, climate, agriculture and the economy in Pakistan's Indus Basin, and discusses the policy and investment implications. The water allocations per the 1991 Provincial Accord and within provinces remain the most critical constraint. Relaxing the Accord constraint, and allowing optimal economic allocation between and within provinces, would enhance the ability to manage extreme events by more reliably meeting system-wide demands. A plausible range of climate changes within the next 80 years could see gross domestic product (GDP), Ag-GDP, and household income decrease by 1.1, 5.1, and 2.0 percent, respectively, on an annual basis. Improvements to system-wide efficiency, construction of new storage, and investments in agriculture technologies to increase crop yield could increase production, but without specific interventions, environmental considerations, such as flow to the sea, changes in depth to groundwater, and the overall salinity situation, are projected to worsen

Hydrology and Glaciers in the Upper Indus Basin

Examines the state of the science associated with the snow and ice hydrology in the Upper Indus Basin (IUB), reviewing the literature and data available on the present and projected role of glaciers, snow fields, and stream flow. Considerable speculation but little analysis exists concerning the importance of glaciers in the volume and timing of flow in the Indus River and its tributaries, as well as on the potential impact of climate change on these rivers. A simple model estimates that glacier runoff contributes approximately 18 percent of the total flow, making melt water from the winter snowpack the most probable source for a majority of the remaining 82 percent, and leaving future runoff regimes to be determined primarily by changes in winter precipitation and summer temperatures. To improve the hydrologic predictability of the UIB requires major investment in snow and ice hydrology monitoring stations, further scientific research, and forecasting

Modelling trade and financial liberalisation effects for Argentina

This thesis is a response to the growing recognition that the workings of the financial sphere significantly affect the value of social production, its distribution, and the magnitude of income poverty. The thesis extends a general equilibrium single-country model targeted to a developing economy (the IFPRI Standard Model) to account for the workings of the financial sphere and 'money in the production function', in the tradition begun by Milton Friedman (1969). The models are calibrated and their workings are analysed. It is found that the inclusion of 'money in the production function' by itself only causes financial outcomes to significantly affect the overall level of production and the unemployment rate in the presence of strong wage rigidities. This is explained in terms of the model parameters. The extended model is employed in a stylised static way to identify the short-run stresses generated by current and capital account liberalisation in Argentina during its Currency Board Regime, adopted over 1991-2001, with the finding that in the short-run the volatility of capital flows was transmitted to employment and activity levels. The model is then linked in a sequential way to a behavioural microsimulations model, separating out the different transmission channels involved. It is found that the significant capital outflows witnessed by the country surrounding the end of its Currency Board Regime worsened poverty and inequality indicators in the country, and that the main transmission channel through which the capital outflow had the most distributional impact was the selectivity of labour market rationing

The Way Forward

Draws together findings from the chain of analyses on Pakistan's Indus Basin, distinguishing between the relative significance of different scenarios, impacts, and adaptations, and highlighting recommendations for research, planning, and policies that can help expand the range of options for Indus Basin management. Key findings include: (1)The 1991 Provincial Water Allocation Accord (DIVACRD) remains a critical hydrologic constraint; (2) Future climate risks will likely impact the macro-economy and households; (3) Non-farm household incomes will suffer more due to increased crop prices; (4) An increase in basin-wide storage will increase the hydropower generation and minimize the impacts of extreme events; (5) Different adaptation investments show potential to minimize the impacts of future climate risks and meet food security objectives; (6) Climate change will likely impact future food availability nationwide; and (7) Groundwater depletion in the fresh water area and basin-wide salinity issues will grow worse with no policy intervention

IBMR Updating to IBMR 2008

The last version of Indus Basin Model Revised (IBMR) is based on data from 2000 (primarily the Agricultural Statistics of Pakistan and water-related data from the Water and Power Development Authority [WAPDA]) and earlier farm surveys (for example, 1976 XAES Survey of Irrigation Agriculture and the Farm Re-Survey in 1988 as part of the Water Sector Investment Planning Study [WSIPS])