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Reflections on the economic modelling of free trade agreements

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  • Nilsson, Lars

    (DG Trade)

Abstract

This paper discusses various aspects of economic modelling of free trade agreements (FTAs) raised directly or indirectly by high-level policymakers and the general public with an interest in trade, including explicit free trade critics. It starts with a brief description of the basic features of computable general equilibrium (CGE) models, their gradual adaptation to modern trade theory and some of the criticism they have been subject to. The paper then discusses the underlying workhorse data and points to a few critical areas which are in need of further efforts to increase the quality of model based simulations. It also describes on-going efforts and past projects that have been undertaken to improve the tools available to modellers. Some necessary practical modelling choices are then discussed in terms of their impact on the modelling results followed by some thoughts on how the results of relatively complex technical undertakings such as CGE modelling exercises could be presented to a broad audience.

Suggested Citation

  • Nilsson, Lars, 2019. "Reflections on the economic modelling of free trade agreements," DG TRADE Chief Economist Notes 2019-2, Directorate General for Trade, European Commission.
    • Handle: RePEc:ris:dgtcen:2019_002
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    Cited by:

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    Keywords

    economic modelling; free trade agreements;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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