Armington Models and Terms-of-Trade Effects: Some Econometric Evidence for North America

Shiells, Clinton R.; Reinert, Kenneth A.

doi:10.2307/135909

Cited by 98 publications

(40 citation statements)

References 16 publications

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“…The value adopted here is the simple average of these values and it seems somewhat plausible compared to the other estimates reported by Jorgenson and Stephenson (1969). 21 These are the industry-wide average values from the estimates by Reinert and Roland-Holst (1992) and Shiells and Reinert (1993).…”

Section: Notesmentioning

confidence: 98%

Uncertainty, Political Preferences, and Stabilization: Stochastic Control Using Dynamic CGE Models

Kim

2004

Computational Economics

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Abstract. This paper is a step toward the merger of optimal control models with dynamic computable general equilibrium (CGE) models. It demonstrates the usefulness of CGE techniques in control theory application and provides a practical guideline to policymakers in this relatively new field. Uncertainty, short-term quantity adjustment processes, and sector-specific political preferences are taken into account in exploring what time paths of adjustments of the economy would be optimal for a government with explicit policy goals. The experimental results highlight the importance of the structures of political preferences and uncertainty when performing optimal stabilization policy exercises.

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Section: Notesmentioning

confidence: 98%

Uncertainty, Political Preferences, and Stabilization: Stochastic Control Using Dynamic CGE Models

Kim

2004

Computational Economics

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“…For instance, while some international …nance studies such as by Backus, Kehoe, and Kydland (1994), Bergin (2006), or Blonigen and Wilson (1999) employ quarterly data, other international …nance studies such as by Corsetti, Dedola, and Leduc (2008) or Crucini and Davis (2016) employ annual data. Similarly, while some international trade studies such as by Anderson and Van Wincoop (2003), Eaton and Kortum (2002), Head and Ries (2001), Simonovska and Waugh (2014a) or Simonovska and Waugh (2014b) consider annual data, other international trade studies such as by Reinert and Roland-Holst (1992) or Shiells and Reinert (1993) consider quartlerly data.…”

Section: Connecting the Two Literaturesmentioning

confidence: 99%

Unifying Macro Elasticities in International Economics

Yilmazkuday

2017

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International trade studies have higher macro (Armington) elasticity measures compared to international finance studies. This observation has evoked not only mixed policy implications regarding tariffs and exchange rates but also mixed welfare gains from trade. Regarding the policy implications, this so-called international elasticity puzzle is solved in this paper by distinguishing between elasticities of substitution and price elasticities of demand that are connected to each other through expenditure shares. It is shown theoretically and confirmed empirically that the macro elasticity in international trade is a weighted average of the macro elasticity in international finance and the elasticity of substitution across products of foreign countries. It is implied that one can always find an elasticity of substitution across foreign countries that would be consistent with different macro elasticities in the two literatures; therefore, the puzzle is something artificial due to the way that the foreign products are aggregated at destination countries. Regarding the welfare gains from trade, the two literatures are shown to have the very same implications when international finance studies have a unitary macro elasticity of substitution between home and foreign products or unitary terms of trade. As opposed to the existing literature that has offered many supplyside solutions to the puzzle, the results in this paper are independent of the supply side and thus are consistent with any production structure.

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“…However, the Armington assumptions have major incidental consequences for other endogenous variables in the model. Many commentators have noted the strength of terms of trade effects in models that use the Armington assumptions (see, for example, Brown, 1987 andShiells andReinert, 1993). The strength of the terms of trade effect is due to the assumption of nationally differentiated goods together with the property of the CES function that all inputs are economically essential because all must be used unless the price of one input goes to zero.…”

Section: The Graphs Inmentioning

confidence: 99%