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Modelling trade and other economic interactions between countries in baseline projections

Eddy Bekkers, Alessandro Antimiani, Caitlyn Carrico, Dorothee Flaig, Lionel Fontagné (), Jean Fouré, Joseph Francois, Ken Itakura (), Zornitsa Kutlina-Dimitrova, William Powers, Bert Saveyn, Roberto Teh, Frank van Tongeren () and Marino Tsigas

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Abstract: This paper examines the way trade and other economic interactions between countries aremodelled in the construction of baseline projections with recursive dynamic computable general equilibrium (CGE) models. Simulations are conducted on the size of tradeelasticities, the way the trade balance is modelled (macroeconomic closure), trade growth, andenergy prices. Other topics scrutinized are the modelling of zeros, modelling of new technologies and new types of trade policies (trade in data and digitalization), phasing in of future trade policies, and migration and remittances. We conclude that there is relative consensus about the use of nested Armington preferences, whereas different scholars model the trade balance very differently. The discrepancy between baseline trade growth and historical trade growth is not considered in most models though highly relevant. Research efforts, both in terms of modelling and data collection, should be allocated to a better coverage of other items on the current account (capital income, remittances) and theinclusion of net foreign debt and asset positions,projecting trade growth based on historical patterns, and better tools to model the rapidly growing digital economy.

Keywords: Trade growth; Macroeconomic closure; Trade structure (search for similar items in EconPapers)
Date: 2020-06-26
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Published in Journal of Global Economic Analysis, 2020, 5 (1), pp.273-345. ⟨10.21642/JGEA.050107AF⟩

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Journal Article: Modelling Trade and Other Economic Interactions Between Countries in Baseline Projections (2020) Downloads
Working Paper: Modelling trade and other economic interactions between countries in baseline projections (2020)
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DOI: 10.21642/JGEA.050107AF

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