Abstract

http://ssrn.com/abstract=329960
 
 

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Taste Parameters as Model Residuals: Assessing the 'Fit' of an Armington Trade Model


Russell H. Hillberry


University of Melbourne - Department of Economics; World Bank - Development Research Group (DECRG)

Michael A. Anderson


Washington and Lee University - Department of Economics

Edward J. Balistreri


Colorado School of Mines - Division of Economics and Business

Alan K. Fox


Government of the United States of America - Research Division

September 2002


Abstract:     
We note that calibration parameters in a multi-country Armington trade model play a role similar to that of econometric residuals: they allow the data to fit the model exactly. We use this premise to evaluate the 'fit' of a standard multi-country computable general equilibrium (CGE) model. We find that the model relies heavily on these parameters to explain the pattern of trade. In 33 of the 46 commodity groups we assess, modeled economic behavior explains less than 20 percent of the variation in bilateral trade. In a calibration-as-estimation experiment we estimate the commodity-specific elasticities of substitution consistent with a well-fitting model and find that they are substantially higher than widely accepted estimates.

Number of Pages in PDF File: 19

Keywords: calibration as estimation, computable general equilibrium, parameterization

JEL Classification: C68, F17

working papers series





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Date posted: December 6, 2002  

Suggested Citation

Hillberry, Russell H. and Anderson, Michael A. and Balistreri, Edward J. and Fox, Alan K., Taste Parameters as Model Residuals: Assessing the 'Fit' of an Armington Trade Model (September 2002). Available at SSRN: http://ssrn.com/abstract=329960 or http://dx.doi.org/10.2139/ssrn.329960

Contact Information

Russell H. Hillberry (Contact Author)
University of Melbourne - Department of Economics ( email )
Melbourne, 3010
Australia
World Bank - Development Research Group (DECRG)
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
Michael A. Anderson
Washington and Lee University - Department of Economics ( email )
Lexington, VA 24450
United States
Edward J. Balistreri
Colorado School of Mines - Division of Economics and Business ( email )
1500 Illinois Street
Golden, CO 80401
United States
202-205-3265 (Phone)
202-205-2340 (Fax)
Alan K. Fox
Government of the United States of America - Research Division ( email )
500 E Street, SW
Washington, DC 20436
United States
202-205-3267 (Phone)
202-205-2340 (Fax)
Feedback to SSRN


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