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Modelling trade and other economic interactions between countries in baseline projections

Author

Listed:
  • Eddy Bekkers
  • Alessandro Antimiani
  • Caitlyn Carrico
  • Dorothee Flaig
  • Lionel Fontagné

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Jean Foure
  • Joseph Francois
  • Ken Itakura
  • Zornitsa Kutlina-Dimitrova
  • William Powers
  • Bert Saveyn
  • Roberto Teh
  • Frank van Tongeren
  • Marino Tsigas

Abstract

This paper examines the way trade and other economic interactions between countries aremodelled in the construction of baseline projections with recursive dynamic computable general equilibrium (CGE) models. Simulations are conducted on the size of tradeelasticities, the way the trade balance is modelled (macroeconomic closure), trade growth, andenergy prices. Other topics scrutinized are the modelling of zeros, modelling of new technologies and new types of trade policies (trade in data and digitalization), phasing in of future trade policies, and migration and remittances. We conclude that there is relative consensus about the use of nested Armington preferences, whereas different scholars model the trade balance very differently. The discrepancy between baseline trade growth and historical trade growth is not considered in most models though highly relevant. Research efforts, both in terms of modelling and data collection, should be allocated to a better coverage of other items on the current account (capital income, remittances) and theinclusion of net foreign debt and asset positions,projecting trade growth based on historical patterns, and better tools to model the rapidly growing digital economy.

Suggested Citation

  • Eddy Bekkers & Alessandro Antimiani & Caitlyn Carrico & Dorothee Flaig & Lionel Fontagné & Jean Foure & Joseph Francois & Ken Itakura & Zornitsa Kutlina-Dimitrova & William Powers & Bert Saveyn & Robe, 2020. "Modelling trade and other economic interactions between countries in baseline projections," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03171653, HAL.
  • Handle: RePEc:hal:cesptp:hal-03171653
    DOI: 10.21642/JGEA.050107AF
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-03171653
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    References listed on IDEAS

    as
    1. Fontagné, Lionel & Martin, Philippe & Orefice, Gianluca, 2018. "The international elasticity puzzle is worse than you think," Journal of International Economics, Elsevier, vol. 115(C), pages 115-129.
    2. Keith Head & John Ries, 2001. "Increasing Returns versus National Product Differentiation as an Explanation for the Pattern of U.S.-Canada Trade," American Economic Review, American Economic Association, vol. 91(4), pages 858-876, September.
    3. Wunderlich, A.C. & Kohler, A., 2018. "Using empirical Armington and demand elasticities in computable equilibrium models: An illustration with the CAPRI model," Economic Modelling, Elsevier, vol. 75(C), pages 70-80.
    4. Erwin Corong & Thomas Hertel & Robert McDougall & Marinos Tsigas & Dominique van der Mensbrugghe, 2017. "The Standard GTAP Model, version 7," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 2(1), pages 1-119, June.
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    Cited by:

    1. Mun Ho & Wolfgang Britz & Ruth Delzeit & Florian Leblanc & Roberto Roson & Franziska Schuenemann & Matthias Weitzel, 2020. "Modelling Consumption and Constructing Long-Term Baselines in Final Demand," Journal of Global Economic Analysis, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, vol. 5(1), pages 63-108, June.

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