Sensitivity analysis in applied general equilibrium models: An empirical assessment for MERCOSUR free trade areas agreements
In this paper, an applied general equilibrium (AGE) model is used to assess the welfare results of alternative free trade areas (FTA) for three MERCOSUR countries, Brazil, Argentina and Uruguay. The results of the sensitivity to shocks and parameters are evaluated. In such a way, the robustness of the results to different degrees of intra-blocs trade liberalization and trade elasticities will be assessed. It is shown that welfare gains for Brazil are very robust to different degrees of trade liberalization, and allocation effects drive these gains. For Argentina and Uruguay, welfare gains depend heavily on a higher degree of liberalization, as they are connected to terms of trade effects. This paper shows that trade elasticities are important parameters driving the model's results, as welfare gains for Argentina and Uruguay in both scenarios are very sensitive to these parameters. Therefore, AGE model's results of alternative FTA for MERCOSUR countries need to consider the uncertainty about parameters and shocks.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diao, Xinshen & Somwaru, Agapi, 2000. "An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 557-588, September.
- Arndt, Channing, 1996. "An Introduction to Systematic Sensitivity Analysis via Gaussian Quadrature," GTAP Technical Papers 305, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Hertel, Thomas W. & Will Martin, 1999. "Would Developing Countries Gain from Inclusion of Manufactures in the WTO Negotiations?," GTAP Working Papers 397, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- DeVuyst, Eric A. & Preckel, Paul V., 1997. "Sensitivity analysis revisited: A quadrature-based approach," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 175-185, April.
- 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.
- Hanslow, Kevin, 2000. "A General Welfare Decomposition for CGE Models," GTAP Technical Papers 498, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Jeffrey A. Frankel, 1997. "Regional Trading Blocs in the World Economic System," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 72, November.
- Wigle, Randall M, 1991. "The Pagan-Shannon Approximation: Unconditional Systematic Sensitivity in Minutes," Empirical Economics, Springer, vol. 16(1), pages 35-49.
- 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 357-362, May.
- Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014.
"Economic implications for Turkey of a Customs Union with the European Union,"
World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 16, pages 395-404
World Scientific Publishing Co. Pte. Ltd..
- Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1997. "Economic implications for Turkey of a Customs Union with the European Union," European Economic Review, Elsevier, vol. 41(3-5), pages 861-870, April.
- Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1996. "Economic implications for Turkey of a customs union with the European Union," Policy Research Working Paper Series 1599, The World Bank.
- Gurgel, Ângelo Costa & Bitencourt, Mayra Batista & teixeira, Erly Cardoso, 2002. "Impactos dos Acordos de Liberalização Comercial Alca e Mercoeuro sobre os Países Membros," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 56(2), April.
- Edson Domingues & Eduardo Haddad & Fernando Perobelli, 2001. "Short-run Regional Effects of Alternative Strategies for Economic Integration: The Case of Brazil," ERSA conference papers ersa01p210, European Regional Science Association.
- Thomas W. Hertel & Zhi Wang & Wusheng Yu, 1998. "Understanding the Determinants of Structural Change in World Food Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(5), pages 1051-1061.
- Coyle, William T. & Mark Gehlhar & Thomas W. Hertel & Zhi Wang & Wusheng Yu, 1998. "Understanding the Determinants of structural Change in World Food Markets," GTAP Working Papers 260, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Thijs ten Raa & Pieter Kop Jansen, 1998. "Bias and Sensitivity of Multipliers," Economic Systems Research, Taylor & Francis Journals, vol. 10(3), pages 275-284.
- repec:sbe:breart:v:25:y:2005:i:1:a:2674 is not listed on IDEAS
- 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.
- teixeira, Erly Cardoso & Figueiredo, Adriano Marcos Rodrigues & Ferreira, Adriana da Vieira, 2001. "Impactos da Integração Econômica nas Commodities da Economia Brasileira e da União Européia," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 55(1), January.
- Hertel, Thomas W & Martin, Will, 2001. "Second-Best Linkages and the Gains from Global Reform of Manufactures Trade," Review of International Economics, Wiley Blackwell, vol. 9(2), pages 215-232, May. Full references (including those not matched with items on IDEAS)