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CGE models for the analysis of trade policy in developing countries

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  • De Melo, Jaime

Abstract

The use of computable general equilibrium (CGE) simulation models for policy analysis has become widespread. However, such techniques are not well suited to economywide analysis in developing countries. Instead, simulation models relying on"borrowed"parameter estimates have been used for a wider range of applications in developing countries. This survey begins with a presentation of the core structure of simulation models for trade policy analysis. It shows that a few share parameters and elasticities, leading to a fourway sectoral classification: exportables, importables, nontradables, and import-dependent sectors. The rest of the survey deals with a range of applications relating to trade policy, internal and external balances, and intertemporal issues. These economywide simulation models are good tools for quantifying the tradeoffs in policy packages that the Bank discusses with its clients. Future modeling exercises would nevertheless benefit from direct econometric estimates rather than"borrowed"parameter estimates.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3.

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Date of creation: 01 Jul 1988
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Handle: RePEc:wbk:wbrwps:3

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Keywords: Economic Theory&Research; Currencies and Exchange Rates; Emerging Markets; Debt Markets; Trade Policy;

References

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  1. Cox, David & Harris, Richard, 1985. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(1), pages 115-45, February.
  2. Mathias Dewatripont & Gilles Michel, 1987. "On closure rules: homogeneity and dynamics in applied general equilibrium models," ULB Institutional Repository 2013/9563, ULB -- Universite Libre de Bruxelles.
  3. R. Dornbusch, 1984. "External Debt, Budget Deficits and Disequilibrium Exchange Rates," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 347, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Feinberg, Robert M, 1989. "The Effects of Foreign Exchange Movements on U.S. Domestic Prices," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 505-11, August.
  5. Isard, Peter, 1977. "How Far Can We Push the "Law of One Price"?," American Economic Review, American Economic Association, American Economic Association, vol. 67(5), pages 942-48, December.
  6. J. Bhagwati & T. N. Srinivasan, 1979. "Revenue-Seeking: A Generalization of the Theory of Tariffs," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 243, Massachusetts Institute of Technology (MIT), Department of Economics.
  7. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, Elsevier, vol. 13(1), pages 25-42, January.
  8. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, American Economic Association, vol. 77(1), pages 93-106, March.
  9. Taylor, Lance & Black, Stephen L., 1974. "Practical general equilibrium estimation of resource pulls under trade liberalization," Journal of International Economics, Elsevier, Elsevier, vol. 4(1), pages 37-58, April.
  10. Kemal Dervis & Sherman Robinson, 1982. "A general equilibrium analysis of the causes of a foreign exchange crisis : The case of Turkey," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 118(2), pages 259-280, June.
  11. Condon, Timothy & de Melo, Jaime, 1991. "Industrial Organization Implications of QR Trade Regimes: Evidence and Welfare Costs," Empirical Economics, Springer, Springer, vol. 16(1), pages 139-53.
  12. de Melo, Jaime & Urata, Shujiro, 1986. "The influence of increased foreign competition on industrial concentration and profitability," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 4(3), pages 287-304, September.
  13. Dornbusch, Rudiger, 1976. " The Theory of Flexible Exchange Rate Regimes and Macroeconomic Policy," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 78(2), pages 255-75.
  14. Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(1), pages 97-125, February.
  15. Decaluwe, B. & Martens, A., 1986. "Cge Modeling and Developing Economies: a Concise Empirical Survey of 56 Applications to 24 Countries," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 8626, Universite de Montreal, Departement de sciences economiques.
  16. Chenery, Hollis B, 1975. "The Structuralist Approach to Development Policy," American Economic Review, American Economic Association, American Economic Association, vol. 65(2), pages 310-16, May.
  17. Dixon, Peter B, 1978. "Economies of Scale, Commodity Disaggregation and the Costs of Protection," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 17(30), pages 63-80, June.
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Cited by:
  1. A. R. Kemal & Rehana Siddiqui & Rizwana Siddiqui, 2001. "Tariff Reduction and Income Distribution: A CGE-based Analysis for Urban and Rural Households in Pakistan," MIMAP Technical Paper Series, Pakistan Institute of Development Economics 2001:11, Pakistan Institute of Development Economics.
  2. Rizwana Siddiqui & Zafar Iqbal, 2001. "Tariff Reduction and Functional Income Distribution in Pakistan: A CGE Model," MIMAP Technical Paper Series, Pakistan Institute of Development Economics 2001:10, Pakistan Institute of Development Economics.
  3. Siddiqui, Rizwana & Iqbal, Zafar, 1999. "TARIFF REDUCTION AND FUNCTIONAL INCOME DISTRIBUTION IN PAKISTAN: A CGE Analysis," MPRA Paper 6141, University Library of Munich, Germany.

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