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Quantitative Trade Models: Developments and Challenges

Author

Listed:
  • Pau Pujolas

    (McMaster University)

  • Jack Rossbach

    (Georgetown University Qatar)

  • Timothy Kehoe

    (University of Minnesota)

Abstract

Applied general equilibrium (AGE) models, which feature multiple countries, multiple industries, and input-output linkages across industries in a Walrasian general equilibrium framework, have been the dominant tool for evaluating the impact of trade liberalization since the 1980s. We review and document shortcomings in the performance of AGE models in predicting the effects of past trade reforms across industries. We argue that to improve their performance in predicting the impact of trade reforms, existing models need to incorporate micro data on bilateral trade relations by industry and to better model how trade reforms lower bilateral trade costs. We use the least-traded-products methodology of Kehoe, Ruhl, and Rossbach (2015) to provide a guide on how improvements can be made.

Suggested Citation

  • Pau Pujolas & Jack Rossbach & Timothy Kehoe, 2017. "Quantitative Trade Models: Developments and Challenges," 2017 Meeting Papers 541, Society for Economic Dynamics.
  • Handle: RePEc:red:sed017:541
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    Citations

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    Cited by:

    1. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CEP Discussion Papers dp1499, Centre for Economic Performance, LSE.
    2. Diego Restuccia & Richard Rogerson, 2017. "The Causes and Costs of Misallocation," Journal of Economic Perspectives, American Economic Association, vol. 31(3), pages 151-174, Summer.
    3. Scott French, 2017. "Comparative Advantage and Biased Gravity," Discussion Papers 2017-03, School of Economics, The University of New South Wales.
    4. Sampson, Thomas, 2017. "Brexit: the economics of international disintegration," LSE Research Online Documents on Economics 86591, London School of Economics and Political Science, LSE Library.
    5. repec:aea:jecper:v:31:y:2017:i:4:p:163-84 is not listed on IDEAS
    6. repec:oup:erevae:v:44:y:2017:i:4:p:592-633. is not listed on IDEAS
    7. Kehoe, Timothy J. & Pujolas, Pau S. & Rossbach, Jack, 2018. "Improving the Analysis of Trade Policy," Economic Policy Paper 18-1, Federal Reserve Bank of Minneapolis.
    8. Thomas Sampson, 2017. "Brexit: The Economics of International Disintegration," CESifo Working Paper Series 6668, CESifo Group Munich.
    9. repec:bpj:pewipo:v:18:y:2017:i:1:p:32-55:n:2 is not listed on IDEAS

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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