Introduction to Numerical Simulation for Trade Theory and Policy

Abstract

This volume provides a practical guide to building and using simulation models for international trade theory and policy. Through a sequence of carefully constructed and fully documented programs, the volume illustrates how numerical simulation can be used to analyze a wide array of problems. Modern computable general equilibrium (CGE) models for trade policy are challenging in their complexity, but can be thought of as constructions of much simpler building blocks. By developing the building blocks in a consistent manner, and gradually putting them together in more complex and interesting ways, the volume makes CGE accessible to anyone with a background in microeconomics/trade theory. The volume will be useful to graduate students and researchers in international trade looking for a detailed guide to building simulation models and to developing the skill set necessary to enter into the world of CGE modeling. Contents: Introduction Getting Started With GAMS Theory of Consumption, Production and Trade: Utility Maximization Cost Minimization Long-Run Production Short-Run Production Dual Approach Transition Higher Dimensions Autarky Small Country Trading Equilibrium Non-traded Goods Large Country Trading Equilibrium Two Country Trading Equilibrium Higher Dimensions and Trade Reciprocal Dumping Monopolistic Competition Commercial Policy and Distortions: Tariffs and Other Trade Interventions Domestic Taxes and Subsidies Factor Market Distortions Computable General Equilibrium: Multiple Households and Other Sources of Demand Armington Preferences Joint Production Social Accounting Matrices Closure Single Country Competitive CGE Concluding Comments Readership: Graduate students and researchers in international trade theory and policy. Key Features: Unlike existing treatments, the topic is approached from the perspective of international trade theory, as opposed to computable general equilibrium. This approach not only clearly links CGE techniques to their foundation in theory, but also makes the complex models used in CGE more accessible to those with a background in trade theory rather than programming The book uses a modular approach, with each of the components of modern models that are used for CGE analysis of trade policy developed in short, self-contained sections that are simple, built in a consistent way, and familiar from standard microeconomics/trade theory, but can be combined in increasingly complex ways The treatment contains numerous examples of the exact programming required, with codes described step-by-step and in detail, and available for download. The material can quickly be adopted and adapted to new problems