TY - JOUR
T1 - Sensitivity analysis in applied general equilibrium models
T2 - An empirical assessment for MERCOSUR free trade areas agreements
AU - Domingues, Edson P.
AU - Haddad, Eduardo A.
AU - Hewings, Geoffrey
PY - 2008/5
Y1 - 2008/5
N2 - In this paper, an applied general equilibrium (AGE) model is used to assess the welfare results of alternative free trade areas (FTA) for three MERCOSUR countries, Brazil, Argentina and Uruguay. The results of the sensitivity to shocks and parameters are evaluated. In such a way, the robustness of the results to different degrees of intra-blocs trade liberalization and trade elasticities will be assessed. It is shown that welfare gains for Brazil are very robust to different degrees of trade liberalization, and allocation effects drive these gains. For Argentina and Uruguay, welfare gains depend heavily on a higher degree of liberalization, as they are connected to terms of trade effects. This paper shows that trade elasticities are important parameters driving the model's results, as welfare gains for Argentina and Uruguay in both scenarios are very sensitive to these parameters. Therefore, AGE model's results of alternative FTA for MERCOSUR countries need to consider the uncertainty about parameters and shocks.
AB - In this paper, an applied general equilibrium (AGE) model is used to assess the welfare results of alternative free trade areas (FTA) for three MERCOSUR countries, Brazil, Argentina and Uruguay. The results of the sensitivity to shocks and parameters are evaluated. In such a way, the robustness of the results to different degrees of intra-blocs trade liberalization and trade elasticities will be assessed. It is shown that welfare gains for Brazil are very robust to different degrees of trade liberalization, and allocation effects drive these gains. For Argentina and Uruguay, welfare gains depend heavily on a higher degree of liberalization, as they are connected to terms of trade effects. This paper shows that trade elasticities are important parameters driving the model's results, as welfare gains for Argentina and Uruguay in both scenarios are very sensitive to these parameters. Therefore, AGE model's results of alternative FTA for MERCOSUR countries need to consider the uncertainty about parameters and shocks.
KW - Applied general equilibrium model
KW - Free trade areas
KW - Trade
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U2 - 10.1016/j.qref.2006.12.018
DO - 10.1016/j.qref.2006.12.018
M3 - Article
AN - SCOPUS:41649096729
VL - 48
SP - 287
EP - 306
JO - Quarterly Review of Economics and Finance
JF - Quarterly Review of Economics and Finance
SN - 1062-9769
IS - 2
ER -