How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?

Thomas Hertel, David Hummels, Maros Ivanic and Roman Keeney ()

No 10477, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Computable General Equilibrium models, widely used for the analysis of Free Trade Agreements (FTAs) are often criticized for having poor econometric foundations. This paper improves the linkage between econometric estimates of key parameters and their usage in CGE analysis in order to better evaluate the likely outcome of a FTA for the Americas. Our econometric work focuses on estimation of the elasticity of substitution among imports from different countries, which is especially critical for evaluating the positive and normative outcomes of FTAs. We match the data in the econometric exercise to the policy experiment at hand. Then we sample from the distribution of parameter values given by our econometric estimates in order to generate a distribution of model results, from which we can construct confidence intervals. We conclude that there is great potential for combining econometric work with CGE-based policy analysis in order to produce a richer set of results that are likely to prove more satisfying to the sophisticated policy maker.

JEL-codes: C15 C68 (search for similar items in EconPapers)
Date: 2004-05
New Economics Papers: this item is included in nep-reg
Note: ITI
References: Add references at CitEc
Citations: View citations in EconPapers (68)

Published as Hertel, Thomas & Hummels, David & Ivanic, Maros & Keeney, Roman, 2007. "How confident can we be of CGE-based assessments of Free Trade Agreements?," Economic Modelling, Elsevier, vol. 24(4), pages 611-635, July.

Downloads: (external link)
http://www.nber.org/papers/w10477.pdf (application/pdf)

Related works:
Journal Article: How confident can we be of CGE-based assessments of Free Trade Agreements? (2007)
Working Paper: How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements? (2003)
Working Paper: How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements? (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:10477

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10477

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().