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

Author

Listed:
  • 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.

Suggested Citation

  • Xiao-guang Zhang & George Verikios, 2006. "Armington Parameter Estimation for a Computable General Equilibrium Model: A Database Consistent Approach," Economics Discussion / Working Papers 06-10, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:06-10
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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2006/06_10_Verikios.pdf
    File Function: First version, 2006
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
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    Cited by:

    1. Fajar Oktiyanto & Harmanta & Nur M. Adhi Purwanto & Aditya Rachmanto, 2014. "Monetary Macroprudential Policy Mix under Financial Frictions Mechanism with DSGE Model," EcoMod2014 6840, EcoMod.
    2. Delahaye, Elliot & Milot, Catherine, 2020. "Measuring the UK Economy’s Armington Elasticities," Conference papers 333170, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Harmanta & Aditya Rachmanto & Fajar Oktiyanto & Idham, 2014. "Interbank Market With Dsge Bank," Working Papers WP/12/2014, Bank Indonesia.
    4. Kenneth W. Clements & Marc Jim M. Mariano & George Verikios, 2021. "Foreign-domestic substitution, import penetration and CGE modelling," Applied Economics, Taylor & Francis Journals, vol. 53(35), pages 4080-4099, July.
    5. Josef Bajzik & Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2019. "Estimating the Armington Elasticity: The Importance of Data Choice and Publication Bias," Working Papers IES 2019/19, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2019.
    6. Bajzik, Josef & Havranek, Tomas & Irsova, Zuzana & Schwarz, Jiri, 2020. "Estimating the Armington elasticity: The importance of study design and publication bias," Journal of International Economics, Elsevier, vol. 127(C).
    7. Cook, Larry & Harslett, Philip, 2015. "An introduction to entropy estimation of parameters in economic models," Conference papers 332651, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    8. Josef Bajzik & Tomas Havranek & Zuzana Irsova & Jiri Schwarz, 2019. "The Elasticity of Substitution between Domestic and Foreign Goods: A Quantitative Survey," Working Papers 2019/12, Czech National Bank.
    9. Karplus, Valerie J. & Paltsev, Sergey & Babiker, Mustafa & Reilly, John M., 2013. "Applying engineering and fleet detail to represent passenger vehicle transport in a computable general equilibrium model," Economic Modelling, Elsevier, vol. 30(C), pages 295-305.

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    More about this item

    Keywords

    Armington assumption; computable general equilibrium models; estimating Armington paprmeters;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - 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

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