Arbeitspapier
Computable general equilibrium models of trade in the modern trade policy debate
We set up two rival Computable General Equilibrium (CGE) models of world trade, one based on classical theories of comparative advantage, the other based on recent gravity theories. We have tested them by indirect inference on the time-series of trade facts for five major countries or country blocs: the UK, the US, China and the EU. The UK is a small enough economy for the rest of the world's behaviour to be treated as exogenous, so we test the UK model with this held constant; the other countries/blocs are large so we test their model by a `part of model' test in which the other world variables are simulated by a reduced form VAR of the unknown true world model.. We show by Monte Carlo experiments that these tests have high power. Our findings are that the Gravity version of the world model is rejected strongly for two of these country cases, but passes the test for the other two. By contrast the Classical model is comfortably accepted in all cases; our power experiment implies that this world model is very likely to be close to the truth and should therefore be used for policy analysis. The policy message of the classical model is that protection is damaging to welfare; this includes protection by customs union, where even though some members may gain, general welfare is reduced.
- Language
-
Englisch
- Bibliographic citation
-
Series: Cardiff Economics Working Papers ; No. E2021/14
- Classification
-
Wirtschaft
Trade: General
Neoclassical Models of Trade
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Trade Policy; International Trade Organizations
Empirical Studies of Trade
Trade and Labor Market Interactions
Trade: Forecasting and Simulation
- Subject
-
Bootstrap
indirect inference
gravity model
classical trade model
UK trade
- Event
-
Geistige Schöpfung
- (who)
-
Chen, Gang
Dong, Xue
Minford, Patrick
Qiua, Guanhua
Xu, Yongdeng
Xu, Zequn
- Event
-
Veröffentlichung
- (who)
-
Cardiff University, Cardiff Business School
- (where)
-
Cardiff
- (when)
-
2021
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Chen, Gang
- Dong, Xue
- Minford, Patrick
- Qiua, Guanhua
- Xu, Yongdeng
- Xu, Zequn
- Cardiff University, Cardiff Business School
Time of origin
- 2021
Other Objects (12)
Understanding UK trade agreements with the EU and other countries
Free Trade under Brexit: Why its benefits have been widely underestimated
Classical or gravity? Which trade model best matches the UK facts?
Testing competing world trade models against the facts of world trade
How the short run effects of Brexit on trade, investment and GDP have been miscalculated in some recent work
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
The banking crisis: A rational interpretation
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Understanding UK trade agreements with the EU and other countries
Free Trade under Brexit: Why its benefits have been widely underestimated
Classical or gravity? Which trade model best matches the UK facts?
Testing competing world trade models against the facts of world trade
How the short run effects of Brexit on trade, investment and GDP have been miscalculated in some recent work
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
The banking crisis: A rational interpretation
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Understanding UK trade agreements with the EU and other countries
Free Trade under Brexit: Why its benefits have been widely underestimated
Classical or gravity? Which trade model best matches the UK facts?
Testing competing world trade models against the facts of world trade
How the short run effects of Brexit on trade, investment and GDP have been miscalculated in some recent work
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
The banking crisis: A rational interpretation