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Forecasting with a CGE model: does it work?

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  • Peter B. Dixon
  • Maureen T. Rimmer

Abstract

Computable general equilibrium models can be used to generate detailed forecasts of output growth for commodities/industries. The main objective is to provide realistic baselines from which to calculate the effects of policy changes. In this paper, we assess a CGE forecasting method that has been applied in policy analyses in the U.S. and Australia. Using data available up to 1998, we apply the method with the USAGE model to generate "genuine forecasts" for 500 U.S. commodities/industries for the period 1998 to 2005. We then compare these forecasts with actual outcomes and with alternate forecasts derived as extrapolated trends from 1992 to 1998.

Suggested Citation

  • Peter B. Dixon & Maureen T. Rimmer, 2009. "Forecasting with a CGE model: does it work?," Centre of Policy Studies/IMPACT Centre Working Papers g-197, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:g-197
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    References listed on IDEAS

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    1. Timothy J. Kehoe, 2003. "An evaluation of the performance of applied general equilibrium models of the impact of NAFTA," Staff Report 320, Federal Reserve Bank of Minneapolis.
    2. Harris, Richard, 1984. "Applied General Equilibrium Analysis of Small Open Economies with Scale Economies and Imperfect Competition," American Economic Review, American Economic Association, vol. 74(5), pages 1016-1032, December.
    3. W. Jill Harrison & J. Mark Horridge & K.R. Pearson, 2000. "Decomposing Simulation Results with Respect to Exogenous Shocks," Computational Economics, Springer;Society for Computational Economics, vol. 15(3), pages 227-249, June.
    4. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    5. Dixon, Peter B & Menon, Jayant & Rimmer, Maureen T, 2000. "Changes in Technology and Preferences: A General Equilibrium Explanation of Rapid Growth in Trade," Australian Economic Papers, Wiley Blackwell, vol. 39(1), pages 33-55, March.
    6. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Forecasting with CGE models
      by Economic Logician in Economic Logic on 2010-04-22 19:05:00

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    Cited by:

    1. Arora, Vipin & Tyers, Rod, 2012. "Asset arbitrage and the price of oil," Economic Modelling, Elsevier, vol. 29(2), pages 142-150.
    2. Mueller, Marc & Ferrari, Emanuele, 2011. "Deriving CGE Baselines from Macro-economic Projections," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114638, European Association of Agricultural Economists.
    3. Banerjee, Onil & Alavalapati, Janaki R.R. & Lima, Eirivelthon, 2016. "A framework for ex-ante analysis of public investment in forest-based development: An application to the Brazilian Amazon," Forest Policy and Economics, Elsevier, vol. 73(C), pages 204-214.

    More about this item

    Keywords

    CGE validation Forecasting U S CGE;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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