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Global Analysis Of Agricultural Trade Liberalization: Assessing Model Validity

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Author Info
Hertel, Thomas W.
Keeney, Roman
Valenzuela, Ernesto

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Abstract

This paper presents a validation experiment of a global CGE trade model widely used for analysis of trade liberalization. We focus on the ability of the model to reproduce price volatility in wheat markets. The literature on model validation is reviewed with an eye towards designing an appropriate methodology for validating large scale CGE models. The validation experiment results indicate that in its current form, the GTAP-AGR model is incapable of reproducing wheat market price volatility and that trade and poverty analysis taking these prices as inputs might be wrongly influenced. We conclude that model validation is tractable and an important component of analysis, as it points to areas to consider for refining analysis. In the specific case presented here, it seems that the Armington structure and trade elasticities are influential in whether the model over our under predicts price volatility for a specific region based on its net trade position for wheat.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20199.

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Date of creation: 2004
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Handle: RePEc:ags:aaea04:20199

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Keywords: International Relations/Trade;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2002. "Estimating consumer demands across the development spectrum: maximum likelihood estimates of an implicit direct additivity model," Journal of Development Economics, Elsevier, vol. 68(2), pages 289-307, August. [Downloadable!] (restricted)
  2. Dimaranan, Betina & Hertel, Thomas & Keeney, Roman, 2003. "OECD Domestic Support and the Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22000, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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  3. Hertel, Thomas & David Hummels & Maros Ivanic & Roman Keeney, 2003. "How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?," GTAP Working Papers 1324, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
    Other versions:
  4. Kehoe, Timothy J & Polo, Clemente & Sancho, Ferran, 1995. "An Evaluation of the Performance of an Applied General Equilibrium Model of the Spanish Economy," Economic Theory, Springer, vol. 6(1), pages 115-41, June.
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  5. DeVuyst, Eric A. & Preckel, Paul V., 1997. "Sensitivity analysis revisited: A quadrature-based approach," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 175-185, April. [Downloadable!] (restricted)
  6. Liu, Jing & Channing Arndt & Thomas Hertel, 2003. "Parameter Estimation and Measures of Fit in A Global, General Equilibrium Model," GTAP Working Papers 1200, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
  7. McCarl, Bruce A., 1984. "Model Validation: An Overview with some Emphasis on Risk Models," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 52(03), December. [Downloadable!]
  8. Kleijnen, J.P.C., 1998. "Validation of simulation, with and without real data," Discussion Paper 22, Tilburg University, Center for Economic Research. [Downloadable!]
  9. Dimaranan, Betina & Hertel, Thomas & Keeney, Roman, 2003. "OECD Domestic Support and Developing Countries," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER). [Downloadable!]
  10. Kleijnen, J.P.C., 1999. "Validation of models : statistical techniques and data availability," Discussion Paper 104, Tilburg University, Center for Economic Research. [Downloadable!]
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  1. Valenzuela, Ernesto & Hertel, Thomas, 2006. "Poverty Vulnerability and Trade Policy: Are the Likely Impacts Discernable?," 2006 Annual meeting, July 23-26, Long Beach, CA 21397, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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