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Are we there yet? Adjustment paths in response to Tariff shocks: a CGE Analysis

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  • Hodges, Cedric
  • Wiskich, Tony

Abstract

This paper takes the mini USAGE model developed by Dixon and Rimmer (2005) and modifies it in order to better mimic the expected adjustment path following a tariff reduction. Results from the adjusted model are compared against the standard model. It is found that while the standard model does a good job of capturing the expected long-run behaviour of the economy in response to this shock, the adjustment path is not appropriate. However, with a few relatively straight forward changes, the standard model can produce both satisfactory long-run outcomes and a more plausible adjustment path. These changes are documented in an appendix and are considered applicable to a wide range of models currently in use.

Suggested Citation

  • Hodges, Cedric & Wiskich, Tony, 2016. "Are we there yet? Adjustment paths in response to Tariff shocks: a CGE Analysis," Conference papers 330171, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330171
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    File URL: https://ageconsearch.umn.edu/record/330171/files/8118_Hodges.pdf
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    References listed on IDEAS

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    1. Kam Leong Szeto, 2002. "A dynamic computable general equilibrium (CGE) model of the New Zealand economy," Treasury Working Paper Series 02/07, New Zealand Treasury.
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