Functional Forms and Parametrization of Cge Models

Abstract

This study focused on the choice of functional forms and their parametrization (estimation of free parameters and calibration of other parameters) in the context of CGE models. Various types of elasticities are defined, followed by a presentation of the functional forms most commonly used in these models and various econometric methods for estimating their free parameters. Following this presentation of the theoretical framework, we review parameter estimates used in the literature. This brief literature review was carried out to be used as a guideline for the choice of parameters for CGE models of developing countries.

Keywords: Trade liberalization, Poverty, elasticities, functional forms, calibration, Computable General Equilibrium (CGE) model

JEL Classification: C51, C81, C82, D58, E27