Assessing Global Computable General Equilibrium Model Validity Using Agricultural Price Volatility

Posted: 26 Jul 2007

See all articles by Ernesto Valenzuela

Ernesto Valenzuela

Federation University Australia

Thomas W. Hertel

Purdue University - Center for Global Trade Analysis; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Roman Keeney

Purdue University

Jeffrey J. Reimer

Oregon State University - Department of Applied Economics

Abstract

Computable General Equilibrium (CGE) models are commonly used for global agricultural market analysis. Concerns are sometimes raised, however, about the quality of their output since key parameters may not be econometrically estimated and little emphasis is generally given to model assessment. This article addresses the latter issue by developing an approach to validating CGE models based on the ability to reproduce observed price volatility in agricultural markets. We show how patterns in the deviations between model predictions and validation criteria can be used to identify the weak points of a model and guide development of improved specifications with firmer empirical foundations.

Suggested Citation

Valenzuela, Ernesto and Hertel, Thomas W. and Keeney, Roman and Reimer, Jeffrey J., Assessing Global Computable General Equilibrium Model Validity Using Agricultural Price Volatility. American Journal of Agricultural Economics, Vol. 89, No. 2, pp. 383-397, May 2007, Available at SSRN: https://ssrn.com/abstract=1002741 or http://dx.doi.org/10.1111/j.1467-8276.2007.00977.x

Ernesto Valenzuela (Contact Author)

Federation University Australia ( email )

100 Clyde Rd
Berwick, Victoria 3806
Australia

Thomas W. Hertel

Purdue University - Center for Global Trade Analysis ( email )

Department of Agricultural Economics
1145 Krannert Building
West Lafayette, IN 47907-1145
United States
765-494-4199 (Phone)
765-494-9176 (Fax)

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

Roman Keeney

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

Jeffrey J. Reimer

Oregon State University - Department of Applied Economics ( email )

213 Ballard Extension Hall
Corvallis, OR 97331-4501
United States

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