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GTAP Resource #674

"Taste Parameters as Model Residuals: Assessing the 'fit' of an Armington Trade Model"
by Hillberry, Russell, Michael Anderson, Edward J. Balistreri and Alan Fox

We note that calibration parameters in a multi-country Armington trade model play a role similar to that of econometric residuals: they allow the model to fit the data exactly. We use this premise to evaluate the "fit" of a standard multi-country computable general-equilibrium model. We find that the model relies heavily on these parameters to explain the pattern of trade. In 33 of the 46 commodity groups we assess, modeled economic behavior explains less than 20% of the variation in bilateral trade. In a calibration- as-estimation experiment, we estimate the commodity-specific elasticities of substitution consistent with a well-fitting model and find that they are substantially higher than widely accepted estimates.

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
2001 Conference Paper
Status: Published
By/In: Review of International Economics 13(5), 973-984; also presented at the 4th Annual Conference on Global Economic Analysis, Purdue University, USA
Date: 2005
Created: (5/30/2001)
Updated: Balistreri, E. (8/27/2007)
Visits: 3,235
- Calibration and parameter estimation

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