GTAP Resources: Resource Display
| GTAP Resource #7540 |
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"Capturing price level impacts of trade policies in a CGE model" by Arriola, Christine and Przemyslaw Kowalski Abstract Computable General Equilibrium (CGE) models are designed to solve for relative prices rather than absolute price levels. These models typically anchor prices to a benchmark index, such as the consumer price index (CPI) or producer price index (PPI), which remains fixed. Consequently, price movements resulting from a policy shock are interpreted relative to this anchored benchmark. However, certain analysis may require flexible price indexes to assess, for example, how policy impacts the overall national price level. Robinson and Thierfelder (2022) examined whether trade liberalisation could reduce CPI inflation. Luu et al, (2020) and OECD (2022) analysed the household distributional effects of trade policy change through its impact on consumer prices. Luu et al, (2020[2]) and OECD (2022[3]) used the OECD METRO model for the analysis and incorporated the exchange rate impact on consumer prices post analyses. This paper proposes to modify the METRO model using the same approach as Robinson and Thierfelder (2022) such that exchange rates, which is defined as the ratio of exchange of domestic currency relative to the world numeraire, becomes the regional numeraire. This adjustment enables consumer price index to fluctuate, opening new possibilities for analysis of economic impacts. |
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- Model extension/development - Model validation and sensitivity analysis - Not Applicable |
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Public Access  Paper (315.4 KB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 9/15/2023 2:05:45 PM
