When applying Computable General Equilibrium (CGE) models to transition economies, it is not plausible to use the standard assumption that the base year data represents stable structural characteristics or even the steady state of the economy. The suggestions forwarded until now to overcome this...

This paper suggests a method of approximating the development of investment in transition economies through an amendment of the standard adjustment cost formulation for investment within dynamic Computable General Equilibrium (CGE) models. Letting adjustment cost depend on the difference between...