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GTAP Resources: Resource Display

GTAP Resource #4758

"Estimating Parameters and Structural Change in CGE Models Using an Information Theoretic, Bayesian, Cross-Entropy Estimation Approach "
by Go, Delfin S, Hans Lofgren, Fabian Mendez-Ramos and Sherman Robinson


Abstract
In this paper, we define a formal information-theoretic, Bayesian approach to estimate parameters of a CGE model in a noisy and limited data environment. The cross-entropy estimation method described in the paper is potentially applicable to all calibrated CGE models and their SAM database. The estimation methodology draws heavily on work by George Judge and Ron Mittlehammer. (2012), An Information Theoretic Approach to Econometrics.

Inferring information about parameters and elements of a country or regional CGE model is problematic because of incomplete, infrequent, inaccessible, or uncertain data such as dated or poorly constructed SAMs and auxiliary information. To estimate behavioral parameters and structural change in CGE models, we implement a three-step cross-entropy estimation method. The data step adjusts the historical SAMs of South Korea and Sub-Saharan Africa to a common base year taking into account that the SAMs are measured with errors and relative price indices are scant. Next, a parameter estimation step calculates (filters) parameters and structural change simultaneously within the specification of the country/regional CGE model. The last step provides some statistics that are useful to measure noise and information gains (possibly because of structural change and/or because of model specification) in recovered parameters as well as statistics that differentiate models through data validation measures.

The approach can be easily used to estimate how economic transformation will bring about structural change and less rigidness in the production and demand behavior of a developing country. There are trade-offs in the number of parameters to be estimated simultaneously due to the degrees of freedom and data constraints. As illustrations, we estimated the Armington and CET trade elasticities for South Korea and Sub-Saharan Africa that are consistent with the case where labor augmenting productivity captured compositional changes in the s...


Resource Details (Export Citation) GTAP Keywords
Category: Other CGE Application
Status: Not published
By/In:
Date: 2015
Version:
Created: Robinson, S. (4/15/2015)
Updated: Batta, G. (5/1/2015)
Visits: 194
- Calibration and parameter estimation
- Dynamic modeling
- Model validation
- Economic growth
- Other data bases and data issues
- Asia (East)


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  File format GTAP Resource 4758  (1.1 MB)   Replicated: 0 time(s)


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