CGE Models for the Analysis of Trade Policy in Developing Countries

55 Pages Posted: 20 Apr 2016

See all articles by Jaime de Melo

Jaime de Melo

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR); World Bank

Date Written: July 1, 1988


The use of computable general equilibrium (CGE) simulation models for policy analysis has become widespread. However, such techniques are not well suited to economywide analysis in developing countries. Instead, simulation models relying on "borrowed" parameter estimates have been used for a wider range of applications in developing countries. This survey begins with a presentation of the core structure of simulation models for trade policy analysis. It shows that a few share parameters and elasticities, leading to a fourway sectoral classification: exportables, importables, nontradables, and import-dependent sectors. The rest of the survey deals with a range of applications relating to trade policy, internal and external balances, and intertemporal issues. These economywide simulation models are good tools for quantifying the tradeoffs in policy packages that the Bank discusses with its clients. Future modeling exercises would nevertheless benefit from direct econometric estimates rather than "borrowed" parameter estimates.

Keywords: Municipal Management and Reform, Economic Policy, Institutions and Governance, Environmental Management, Trade and Multilateral Issues, Environmental Economics & Policies, Trade Policy, Rules of Origin, Environmental Strategy, Urban Governance and Management

Suggested Citation

de Melo, Jaime, CGE Models for the Analysis of Trade Policy in Developing Countries (July 1, 1988). World Bank Policy Research Working Paper No. 3. Available at SSRN:

Jaime De Melo (Contact Author)

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
+41 22 705 8273 (Phone)
+41 22 705 8293 (Fax)


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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