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Functional Forms and Parametrization of CGE Models

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  • Nabil Annabi
  • John Cockburn
  • Bernard Decaluwé

Abstract

This study focused on the choice of functional forms and their parametrization (estimation of free parameters and calibration of other parameters) in the context of CGE models. Various types of elasticities are defined, followed by a presentation of the functional forms most commonly used in these models and various econometric methods for estimating their free parameters. Following this presentation of the theoretical framework, we review parameter estimates used in the literature. This brief literature review was carried out to be used as a guideline for the choice of parameters for CGE models of developing countries.

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Bibliographic Info

Paper provided by PEP-MPIA in its series Working Papers MPIA with number 2006-04.

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Date of creation: 2006
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Handle: RePEc:lvl:mpiacr:2006-04

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Related research

Keywords: Trade liberalization; Poverty; Elasticities; Functional forms; Calibration; Computable General Equilibrium (CGE)Model;

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References

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  1. McKitrick, Ross R., 1998. "The econometric critique of computable general equilibrium modeling: the role of functional forms," Economic Modelling, Elsevier, vol. 15(4), pages 543-573, October.
  2. Löfgren, Hans, 2001. "Less poverty in Egypt?," TMD discussion papers 72, International Food Policy Research Institute (IFPRI).
  3. Cezary A. Kapuscinski & Prof Peter G. Warr, 1996. "Estimation of Armington Elasticities: An Application to the Philippines," Trade and Development 96/8, Australian National University, Department of Economics.
  4. ABDELKHALEK, Touhami & DUFOUR, Jean-Marie, 1998. "Confidence Regions for Calibrated Parameters in Computable General Equilibrium Models," Cahiers de recherche 9810, Universite de Montreal, Departement de sciences economiques.
  5. ABDELKHALEK, Touhami & DUFOUR, Jean-Marie, 1997. "Statistical Inference for Computable General Equilibrium Models with Application to a Model of the Moroccan Economy," Cahiers de recherche 9713, Universite de Montreal, Departement de sciences economiques.
  6. Howe, Howard, 1975. "Development of the extended linear expenditure system from simple saving assumptions," European Economic Review, Elsevier, vol. 6(3), pages 305-310, July.
  7. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
  8. Arndt, Channing & Robinson, Sherman & Tarp, Finn, 1999. "Parameter estimation for a computable general equilibrium model: a maximum entropy approach," TMD discussion papers 40, International Food Policy Research Institute (IFPRI).
  9. Perroni, Carlo & Rutherford, Thomas F, 1998. "A Comparison of the Performance of Flexible Functional Forms for Use in Applied General Equilibrium Modelling," Computational Economics, Society for Computational Economics, vol. 11(3), pages 245-63, June.
  10. Hanoch, Giora, 1971. "CRESH Production Functions," Econometrica, Econometric Society, vol. 39(5), pages 695-712, September.
  11. Devarajan, Shantayanan & Go, Delfin S. & Hongyi Li, 1999. "Quantifying the fiscal effects of trade reform," Policy Research Working Paper Series 2162, The World Bank.
  12. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-51, September.
  13. Scarf,Herbert E. & Shoven,John B., 2008. "Applied General Equilibrium Analysis," Cambridge Books, Cambridge University Press, number 9780521070935, December.
  14. Harrison, Glenn W & Vinod, H D, 1992. "The Sensitivity Analysis of Applied General Equilibrium Models: Completely Randomized Factorial Sampling Designs," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 357-62, May.
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Cited by:
  1. Banerjee, Onil & Alavalapati, Janaki, 2009. "A computable general equilibrium analysis of forest concessions in Brazil," Forest Policy and Economics, Elsevier, vol. 11(4), pages 244-252, July.
  2. Lofgren, Hans, 2012. "World food prices and human development: Policy simulations for archetype low-income countries," Policy Research Working Paper Series 6033, The World Bank.
  3. Margaret Chitiga & Bernard Decaluwe & Ramos Mabugu & Helene Maisonnave & Veronique Robichaud & Debra Shepherd & Servaas van der Berg & Dieter von Fintel, 2010. "The impact of the international economic crisis on child poverty in South Africa," Working Papers 201015, University of Pretoria, Department of Economics.
  4. Jouko Kinnunen & Saara Tamminen & Mira Jussila, 2012. "The estimation of LES demand elasticities for CGE models," Working Papers 39, Government Institute for Economic Research Finland (VATT).
  5. Fofana, Ismaël & Corong, Erwin & Chatti, Rim & Bouazouni, Omar, 2012. "Taxation policy and gender employment in the Middle East and North Africa Region: A comparative analysis of Algeria, Egypt, Morocco, and Tunisia," IFPRI discussion papers 1227, International Food Policy Research Institute (IFPRI).
  6. Chitiga, Margaret & Fofana, Ismael & Mabugu, Ramos, 2011. "A multiregion general equilibrium analysis of fiscal consolidation in South Africa:," IFPRI discussion papers 1110, International Food Policy Research Institute (IFPRI).
  7. Kebede, Sindu & Fekadu, Belay & Aredo, Dejene, 2011. "Trade Liberalization and Poverty: A Macro-Micro Analysis in Ethiopia," Proceedings of the German Development Economics Conference, Berlin 2011 44, Verein für Socialpolitik, Research Committee Development Economics.
  8. Hélène Maisonnave & Ramos Mabugu & Margaret Chitiga & Véronique Robichaud, 2013. "Analysing Job Creation Effects of Scaling Up Infrastructure Spending in South Africa," Cahiers de recherche 1310, CIRPEE.

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