Product differentiation and foreign trade in CGE models of small economies
In recent years, two classes of computable general equilibrium (CGE) trade models have been used to investigate external sector policies: single country and and multicountry trade models. The authors examine the treatment of exports and imports in recent single country CGE models of small economies. They present a simple, one sector analytical model that captures the major features of the multi sector counterpart used in applied models. They show that applying the same assumption about product differentiation to imports as to exports gives rise to a well behaved, price taking economy and normally shaped offer curves. They illustrate the one-sector model with a numerical example which shows the implications of the choice of weights used as a proxy for the domestic price index in computations of real exchange rate indices. The model also shows the role of foreign trade elasticities in the popular Australian model, with traded and nontraded goods. Trade substitution elasticities on the import side play a crucial role in determining the direction of change in real exchange rate during terms of trade perturbations.
|Date of creation:||28 Feb 1989|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jones, Ronald W & Berglas, Eitan, 1977. "Import Demand and Export Supply: An Aggregation Theorem," American Economic Review, American Economic Association, vol. 67(2), pages 183-87, March.
- Whalley, John & Yeung, Bernard, 1984. "External sector closing rules in applied general equilibrium models," Journal of International Economics, Elsevier, vol. 16(1-2), pages 123-138, February.
- John Whalley, 1984. "Trade Liberalization among Major World Trading Areas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262231204, December.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:144. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.