Comparing the Economic Impact of an Export Shock in Two Modeling Frameworks

Andrew Cassey (), David Holland and Abdul Razack ()
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Abdul Razack: School of Economic Sciences, Washington State University

No 2010-12, Working Papers from School of Economic Sciences, Washington State University

Abstract: Because of more restrictive assumptions on regional input-output (IO) models compared to computable general equilibrium (CGE) models, the literature agrees IO results are intuitively consistent with long run equilibrium but otherwise overestimated. We compare the results of IO and CGE models from an exogenous export shock under various labor market constraints and capital closures. Consistent with the literature, we find the IO model's results do not match those of the CGE models. But contrary to conventional wisdom, the positive secondary impacts are larger with the CGE models than with the IO model. Furthermore, we find the closest match between direct effects is when the CGE model has short run restrictions. Our finding means that the common view of CGE model results being both lower in estimate and more accurate in the short run than IO models does not universally hold. Thus researchers’ choice of models and interpretation of results need to be more nuanced and cautious than previously thought.

Keywords: input-output; computable general equilibrium; economic impacts; exports (search for similar items in EconPapers)
JEL-codes: C67 C68 R13 R15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2010-07
New Economics Papers: this item is included in nep-cmp
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Comparing the Economic Impact of an Export Shock in Two Modeling Frameworks (2011)
Journal Article: Comparing the Economic Impact of an Export Shock in Two Modeling Frameworks (2011)
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