The Palestinian economy and its trade pattern: Stylised facts and alternative modelling strategies
AbstractThe World Bank (WB) Computational General Equilibrium model (CGE) by Claus Astrup and Sebastian Dessus (2001) is a cornerstone study on Palestine. It adopts a strictly neoclassical perspective, in which price-driven adjustments and the Armington/Constant-Elasticity-of-Transformation (CET) apparatus describe the functioning of the Palestinian economy and its foreign trade relations. This paper argues that certain empirical and factual inconsistencies prevent such a “pure” neoclassical approach from representing the Palestinian reality. We firstly argue that quantity-driven adjustments better describe economic adjustments within the Palestinian economy than price-driven adjustments do. Secondly, we stress the prevailing inter-industry nature of Palestinian foreign trade and the relevance of real income variables to explain expenditure allocation between domestic and imported goods. These aspects are hardly caught by the Armington/CET apparatus and require an alternative formalizing strategy. The final section of the paper describes a heterodox/structuralist perspective on Palestine.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 29719.
Date of creation: Oct 2010
Date of revision:
Palestine; Foreign trade; Structuralist CGE models;
Find related papers by JEL classification:
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-02 (All new papers)
- NEP-ARA-2011-04-02 (MENA - Middle East & North Africa)
- NEP-HME-2011-04-02 (Heterodox Microeconomics)
- NEP-INT-2011-04-02 (International Trade)
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