This paper documents the foreign asset ownership and investment theory of the dynamic GTAP model (GTAP-Dyn). The new investment theory offers a disequilibrium approach to modeling endogenously international capital mobility. It permits a recursive solution procedure, a feature that allows easy implementation of dynamics into any static AGE model without imposing limitations on the model's size. The method involves treating time as a variable, not as an index. Having time as a variable allows the construction of dynamic GTAP with minimum modifications to the existing structure of GTAP, by separating the theory of static GTAP from the length of run.
Dynamic CGE modeling
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