
Validation study

Comparison of endogenous price variability through stochastic simulation with observed historical price volatility.
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This version incorporates the econometrically estimated price transmission elasticities in wheat for the period 1991-2001

These PTEs are converted to tax equivalent into the gtap code as

Equation TFMPTEEQN
# Tariff equivalent price transmission elasticity equation#
(all,i,WHEAT_COMM)(all,r,REG) all,s,REG)
   tm(i,r,s) =  [PTE(s) - 1] * pcif(i,r,s);
 
Equation TFXPTEEQN
# Tariff equivalent price transmission elasticity equation#
(all,i,WHEAT_COMM)(all,r,REG) all,s,REG)
   tx(i,r,s) =  [PTE(r) - 1] * pfob(i,r,s);

In addition, the domestic price pm(i,r) is deflated by pgdp(r).

Trade elasticities are incorporated from Hertel et.al. (2004), which are subsequently incorporated into the version 6 of the Database.



The full set of equations included in the model code can be access in the "View" menu, selecting Tab files--> Main model

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The 17 regions are:


1	AUS	Australia
2	CHN	China
3	JPN	Japan
4	OEASIA	Other East Asia
5	STHASIA	South Asia
6	CAN	Canada
7	USA	USA
8	MEX	Mexico
9	ARG	Argentina
10	BRZ	Brazil
11	RLAmer	Rest of Latin America
12	EU15	EU15
13	OEUR	Other Europe
14	RUS	Russia 
15	MENA	Middle East & North Africa
16	SSA	Sub Saharan Africa
17	ROW	Rest of the Wolrd


The mapping is


Regions	Original 		66 GTAP regions in GTAP 5
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Argentina			Argentina
Australia			Australia
Brazil			Brazil
Canada			Canada
China			China
Japan			Japan
Mexico			Mexico
United States		United States
European Union		Austria; Belgium; Denmark; Finland; France; Germany; United Kingdom; Greece; Ireland;					Italy; Luxembourg; Netherlands; Portugal; Spain; Sweden
Middle East & North Africa	Rest of Middle East; Morocco; Rest of North Africa
Other Europe		Switzerland; Rest of Eur Fr; Albania; Bulgaria; Croatia; Czech Republic; Hungary; Malta;					Poland; Romania; Slovakia; Slovenia; Estonia; Latvia; Lithuania; Cyprus; Turkey
Rest of Latin America	Central America; Colombia; Peru; Venezuela; Rest of Andean Region; Chile; Uruguay; 					Rest of South America
South Asia		Indonesia; Malaysia; Philippines; Singapore; Thailand; Vietnam; Bangladesh; 						India; Sri Lanka; Rest of South Asia
Sub Saharan Africa		Botswana; Rest of South Africa; Malawi; Mozambique; Tanzania; Zambia;						Zimbabwe; Other Southern Africa; Uganda; Rest of Sub-Saharan Africa
Other East Asia		Hong Kong; Korea; Taiwan
Russia			Russian Federation; Rest of Former Soviet Union
Rest of World		New Zealand; Rest of World




The 24 sectors are as follows:


No.	String
1	pdr	Paddy rice
2	wht	Wheat 
3	gro	Cereal grains nec
4	v_f	Vegetables, fruit, nuts	
5	osd	Oil seeds
6	c_b	Sugar cane, sugar beet
7	pfb	Plant-based fibers
8	ocr	Crops nec
9	ctl	Cattle,sheep,goats,horses
10	oap	Other Animal products nec
11	rmk	Raw milk
12	wol	Wool, silk-worm cocoons		
13	fish	Fishing	
14	cogm	Coal, Oil, Gas, Minerals	
15	cmt	Meat: cattle,sheep,go.,ho.
16	omt	Other Meat products nec	
17	vol	Vegetable oils and fats
18	mil	Dairy products	
19	pcr	Processed rice	
20	sgr	Sugar
21	ofd	Food products nec
22	b_t	Bev. and tobacco products
23	mnfcs	Manufacturing
24	svces	Services




The mapping is


Sectors in this study		Original 57 GTAP sectors
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Paddy rice			Paddy rice
Wheat				Wheat
Cereal grains nec			Cereal grains nec
Vegetables, fruit, nuts		Vegetables, fruit, nuts
Oil seeds				Oil seeds
Sugar cane, sugar beet		Sugar cane, sugar beet
Plant-based fibers			Plant-based fibers
Crops nec			Crops nec
Cattle,sheep,goats,horses		Cattle,sheep,goats,horses
Other Animal products nec		Animal products nec
Raw milk				Raw milk
Wool, silk-worm cocoons		Wool,silk-worm cocoons
Fishing				Fishing
Coal, Oil, Gas, Minerals		Coal; Oil; Gas; Minerals nec
Meat: cattle,sheep,go.,ho.		Meat: cattle,sheep,goats,horse
Other Meat products nec		Other Meat products nec
Vegetable oils and fats		Vegetable oils and fats
Dairy products			Dairy products
Processed rice			Processed rice
Sugar				Sugar
Food products nec			Food products nec
Bev. and tobacco products		Beverages and tobacco products
Manufacturing			Forestry; Textiles; Wearing apparel; Leather products; Wood products; 						Paper products, publishing; Petroleum, coal products; Chemical,rubber,						plastic prods; Mineral products nec; Ferrous metals; Metals nec; Metal products; 					Motor vehicles and parts; Transport equipment nec; Electronic equipment; 						Machinery and equipment nec; Manufactures nec
Services				Electricity; Gas manufacture, distribution; Water; Construction; Trade;							Transport nec; Sea transport; Air transport; Communication; Financial services; 						Insurance; Business services nec; Recreation and other services; 							PubAdmin/Defence/Health/Educat; Dwellings

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EXPERIMENTS RELATING TO MODELING WHEAT PRICE VOLATILITY

a) agrtrade   , 
which is the standard version of the model with the Hertel et.al.s (2004) trade elasticities. These elasticities are standard in the version 6 of the GTAP database.

b)PTEMtrad  , 
which is the version with the Price Transmission Elasticities included in the importers, and the new trade elasticities.


INSTRUCTIONS TO CARRY OUT STOCHASTIC SIMULATIONS
1)Solve the model at the normalized mean of productivity distributions by clicking the Solve button on the Solve page. The shock for this solution is already provided on the Shocks page as:  Shock aoall("wht",REG) = uniform 0;

2)Once the model finishes solving, click on the Tools drop-down menu, and select Sensitivity, then select w.r.t. Shocks. This will open the SSA dialogue box. 

3)Within the SSA dialogue box, complete the following steps:
a)Select aoall in the Shocks to vary window.
b)Select wht in the first Elements to vary window
c)Select the AUS as the region in the second Elements to vary window
d)In the Type of Variation box, choose C: ordinary Change
e)Type the k-value from the table (found bellow) of this document in the Amount of variation window
f)Make certain that Triangular is chosen in the Type of Distribution box
g)Click the Add to List button. DO NOT CLICK OK YET.
h)Return to 3) c) above and input the shock for the second region in the list and in the table of shocks. Repeat this until all inputs from Table 1 have been made.
i)Click on OK button.
j)Choose to solve with the Stroud quadrature.
k)Click on OK button.


TABLE OF SHOCKS

	 	SSA shock
		__________
Brazil		82.96
Australia		69.39
China		24.05
Japan		34.33
Canada		44.92
USA		31.95
Mexico		39.67
Argentina		59.09
Lat. Amer.	29.79
Russia		36.90
SSA		36.67
EU15		22.43
Rest Eur.		36.43
Sth. Asia		20.45
ME N. Afr.	25.81
