Historical validation of saving and trade intensities using the GDyn-FS model and historically informed baseline projection

Following the GFC growth in global trade has been sluggish with recent trade tension providing doubt as to whether these trends will change any time soon. This paper looks at possible alternative future trade growth scenarios and what these may mean for trade policy formation at the national, regional and global levels. To support the formation of the baseline for this analysis, the capabilities of the dynamic GDyn-FS model are enhanced to: (i) target saving and trade intensities over the historical period; and (ii) gradually adjust to longer-run target values based on historical trends and theoretical projections. The projections suggest global exports could expand to reach around 35 percent of global output by 2050 from the current level of around 30 percent. Such an increase is consistent with an estimated trade to income elasticity of about 1.2. Projections of the Brown-Kojima-Drysdale regional trade intensity indexes indicate a potential for substantial re-orientation of the trading relationship between regions. Effective domestic reform and non-discriminatory trading protocols are likely to be most beneficial for realizing trade and associated income growth.