How Reliable are ORANI Conclusions?

Adrian Pagan and J. H. Shannon

The Economic Record, 1987, vol. 63, issue 1, 33-45

Abstract: This paper seeks to systematically review the main criticisms of the ORANI model by developing a graphical version of a two‐sector (exportables and nonexportables) miniature ORANI model. This model shows that ORANI results occur because while supply curves in both sectors have similar slopes. the slopes of the demand curves are polar opposites. Furthermore this model shows that results will tend to be more sensitive to variations in supply rather than demand parameters. Experiments using the ORANI model itself verified these findings. These results indicate that some form of sensitivity analysis with respect to assigned parameter values should form an integral part of any ORANI experiment.

Date: 1987
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