Calibrating Long-Term Trade Baselines in General Equilibrium

Lionel Fontagné and Jean Fouré

Chapter 4 in Policy Analysis and Modeling of the Global Economy:A Festschrift Celebrating Thomas Hertel, 2021, pp 97-127 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Elaborating on seminal calibrations of baselines of global models by the Global Trade Analysis Project (GTAP) community, the World Bank, the OECD and IIASA, we combine a fully-fledged macro-econometric growth model (MaGE) with a Computable General Equilibrium Model (MIRAGE-e) and contribute to the field of long-term baselines through an analysis of the determinants of world trade flows. Doing so, we rely on a cross-cutting approach which mixes a theoretically founded macroeconomic framework with a dynamic global and multi-sector model, maximizing consistency between them, and use this framework for historical simulations, as a first step toward a better calibration — or validation — of Computable General Equilibrium (CGE) models. We use this historical simulation exercise to enlighten three baseline exercises in line with Shared Socioeconomic Pathways (SSPs) narratives, and show how retroactions between baseline assumptions and macroeconomic fundamentals — such as the current account and labor participation — impact the model outcomes and must therefore be implemented in the macroeconomic projections. Our results also point out the relation between trade growth and macroeconomic determinants, the latter influencing more the allocation of marginal trade flows between countries than the global trade-intensity of growth.

Keywords: Computable General Equilibrium Modeling; CGE Models; Trade Policy Modeling; GTAP; Global Trade Analysis Project; Trade Impact Assessments; Sustainability Impact Assessments; Trade and Employment; Trade and Climate; Globalization; Preferential Trade Agreements; Thomas Hertel (search for similar items in EconPapers)
JEL-codes: C68 F13 F18 Q54 Q56 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Calibrating Long-Term Trade Baselines in General Equilibrium (2018)
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