GTAP Resources: Resource Display
| GTAP Resource #6839 |
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"A Comparison of CGE Versus Gravity-Based Agri-Food Trade Between the EU and Japan" by Berndt, Marvin and Sebastian Hess Abstract During negotiations of free trade agreements such as the recent EU-Japan Free Trade Agreement (JEFTA), economic ex ante analyses of future trade flows are an important input to negotiations and provide guidelines for industry representatives in their evaluation of policy proposals. Two methodological approaches for assessing trade flows have emerged that differ fundamentally from one other: gravity models and computable general equilibrium (CGE) models. In CGE models, trade flows are typically determined through the Armington parameters for import substitution, while gravity models tend to predict trade flows econometrically based on the GDP of trade partners and additional covariates. We investigate the accuracy of both models in terms of their projection of actual trade flows from the EU to Japan for the year 2018. CGE and gravity model produce results in the range of aggregated trade flows, while the CGE is slightly more accurate. However, neither the standard CGE nor the gravity model gave satisfactory accurate predictions of disaggregated agri-food trade towards Japan at the sectoral level. Real world changes in trade flows only match the changes according to the CGE model in case of rather few sectors. |
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- Model validation and sensitivity analysis - Asia (East) - European Union |
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Last Modified: 9/15/2023 2:05:45 PM
