Parameter Estimation for a Computable General Equilibrium Model: A Maximum Entropy Approach

Economic Modelling ; DOI: 10.1016/S0264-9993(01)00068-2

Posted: 27 Nov 2014

See all articles by Channing Arndt

Channing Arndt

United Nations - World Institute for Development Economics Research (UNU/WIDER)

Sherman Robinson

International Food Policy Research Institute (IFPRI)

Finn Tarp

University of Copenhagen - Department of Economics

Date Written: 2002

Abstract

We introduce a maximum entropy approach to parameter estimation for computable general equilibrium (CGE) models. The approach applies information theory to estimating a system of non-linear simultaneous equations. It has a number of advantages. First, it imposes all general equilibrium constraints. Second, it permits incorporation of prior information on parameter values. Third, it can be applied in the absence of copious data. Finally, it supplies measures of the capacity of the model to reproduce the historical record and the statistical significance of parameter estimates. The method is applied to estimating a CGE model of Mozambique.

Suggested Citation

Arndt, Channing and Robinson, Sherman and Tarp, Finn, Parameter Estimation for a Computable General Equilibrium Model: A Maximum Entropy Approach (2002). Economic Modelling ; DOI: 10.1016/S0264-9993(01)00068-2 . Available at SSRN: https://ssrn.com/abstract=2530624

Channing Arndt (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6 B
Helsinki, FI‐00160
Finland

Sherman Robinson

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Finn Tarp

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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