Quantitative Trade Models: Developments and Challenges

Timothy Kehoe, Pau Pujolas and Jack Rossbach

No 537, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: Applied general equilibrium (AGE) models, which feature multiple countries or regions, multiple sectors, and input-output linkages across sectors in a Walrasian general equilibrium framework, have been the dominant tool for evaluating the impact of trade liberalization since the 1980s. We provide an overview of the historical development of AGE models and a guide as to how they are used to perform policy analysis. We then review and document shortcomings in the performance of AGE models in predicting the sectoral effects of past trade reforms, that is, we show that AGE models often perform poorly. We provide suggestive evidence that incorporating some of the recent advances in quantitative trade theory in AGE models can improve their predictive ability.

Keywords: Trade liberalization; Input-output linkages; Extensive margin; Applied general equilibrium (search for similar items in EconPapers)
JEL-codes: F11 F13 F14 F17 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2016-09-28
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Quantitative Trade Models: Developments and Challenges (2017)
Working Paper: Quantitative Trade Models: Developments and Challenges (2017)
Working Paper: Quantitative Trade Models: Developments and Challenges (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:537

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