Armington Parameter Estimation for a Computable General Equilibrium Model: A Database Consistent Approach

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Armington Parameter Estimation for a Computable General Equilibrium Model: A Database Consistent Approach

Author Info

Xiao-guang Zhang (Australian Productivity Commission)
George Verikios () (Department of Economics, The University of Western Australia)

Abstract

Substitution elasticities in policy-oriented computable general equilibrium (CGE) models are key parameters for model results since they determine behaviour in these models. As Dawkins et al. (2001) observe, the current situation with regard to the elasticities available for use in these models is poor. We focus on an important type of elasticity that is widely used in CGE models with international trade: the so-called ‘Armington’ elasticities (Armington, 1969). These elasticities are well known for their critical role in determining model results. We present an alternative approach to quantifying Armington elasticities which is consistent across historical databases. The approach is used to derive elasticities from successive databases of a commonly-used global CGE model, the GTAP model.

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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-10.

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Length: 36 pages
Date of creation: 2006
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Handle: RePEc:uwa:wpaper:06-10

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Find related papers by JEL classification:
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
F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-05-12 (All new papers)
NEP-CMP-2007-05-12 (Computational Economics)

References listed on IDEAS
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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. [Downloadable!] (restricted)
Arndt, Channing & Robinson, Sherman & Tarp, Finn, 2002. "Parameter estimation for a computable general equilibrium model: a maximum entropy approach," Economic Modelling, Elsevier, vol. 19(3), pages 375-398, May. [Downloadable!] (restricted)

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