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Global Analysis Of Agricultural Trade Liberalization: Assessing Model Validity

  • Hertel, Thomas W.
  • Keeney, Roman
  • Valenzuela, Ernesto

This paper presents a validation experiment of a global CGE trade model widely used for analysis of trade liberalization. We focus on the ability of the model to reproduce price volatility in wheat markets. The literature on model validation is reviewed with an eye towards designing an appropriate methodology for validating large scale CGE models. The validation experiment results indicate that in its current form, the GTAP-AGR model is incapable of reproducing wheat market price volatility and that trade and poverty analysis taking these prices as inputs might be wrongly influenced. We conclude that model validation is tractable and an important component of analysis, as it points to areas to consider for refining analysis. In the specific case presented here, it seems that the Armington structure and trade elasticities are influential in whether the model over our under predicts price volatility for a specific region based on its net trade position for wheat.

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File URL: http://purl.umn.edu/20199
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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20199.

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Date of creation: 2004
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Handle: RePEc:ags:aaea04:20199
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  1. Timothy J. Kehoe & Clemente Polo & Ferran Sancho, 1994. "An evaluation of the performance of an applied general equilibrium model of the Spanish economy," Working Papers 480, Federal Reserve Bank of Minneapolis.
  2. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, June.
  3. Thomas Hertel & David Hummels & Maros Ivanic & Roman Keeney, 2004. "How Confident Can We Be in CGE-Based Assessments of Free Trade Agreements?," NBER Working Papers 10477, National Bureau of Economic Research, Inc.
  4. Kleijnen, J.P.C., 1999. "Validation of Models : Statistical Techniques and Data Availability," Discussion Paper 1999-104, Tilburg University, Center for Economic Research.
  5. Dimaranan, Betina V. & Hertel, Thomas W. & Keeney, Roman, 2003. "OECD Domestic Support and the Developing Countries," 2003 Annual meeting, July 27-30, Montreal, Canada 22000, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Dimaranan, Betina & Hertel, Thomas & Keeney, Roman, 2003. "OECD Domestic Support and Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Kleijnen, J.P.C., 1999. "Validation of models : Statistical techniques and data availability," Other publications TiSEM f2238bd9-e4c9-430a-96f2-a, Tilburg University, School of Economics and Management.
  8. 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.
  9. Ludo Peeters & Yves Surry, 1997. "A Review Of The Arts Of Estimating Price-Responsiveness Of Feed Demand In The European Union," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 379-392.
  10. Liu, Jing & Arndt, Channing, 2004. "Parameter Estimation and Measures of Fit in A Global, General Equilibrium Model," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 19, pages 626-649.
  11. William R. Cline, 2004. "Trade Policy and Global Poverty," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 379, December.
  12. McCarl, Bruce A., 1984. "Model Validation: An Overview with some Emphasis on Risk Models," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 52(03), December.
  13. Kleijnen, J.P.C., 1998. "Validation of Simulation, With and Without Real Data," Discussion Paper 1998-22, Tilburg University, Center for Economic Research.
  14. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2002. "Estimating consumer demands across the development spectrum: maximum likelihood estimates of an implicit direct additivity model," Journal of Development Economics, Elsevier, vol. 68(2), pages 289-307, August.
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