Starting from our earlier multi-region trade model, we develop two new 24 sector small open economy (SOE) computable general equilibrium models (CGE) of Chile. One is comparative static and the other is dynamic. We evaluate the impact of Chile forming free trade agreements with either NAFTA or MERCOSUR. Our principal result is that the dynamic SOE model does not produce welfare estimates significantly different from the comparative static SOE model. Our second result is that, although the difference is small, it is possible for a fully dynamic model to produce welfare estimates for a preferential trade area that are welfare inferior than those from a comparative static model.
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Find related papers by JEL classification: F15 - International Economics - - Trade - - - Economic Integration F17 - International Economics - - Trade - - - Trade Forecasting and Simulation C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
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