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An Inter‐temporal General Equilibrium Econometric Model for a Small Open Economy with Application to Australia
Author(s) -
Han SangHee,
Woodland Alan D.
Publication year - 2003
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.00075
Subject(s) - economics , tariff , general equilibrium theory , econometric model , small open economy , investment (military) , econometrics , open economy , economy , capital (architecture) , macroeconomics , microeconomics , international economics , monetary policy , exchange rate , politics , political science , law , history , archaeology
An inter‐temporal general equilibrium econometric model is developed for the Australian economy and used to simulate a trade policy. The model treats the prices of non‐traded goods as endogenous and takes account of the inter‐temporal optimality conditions implicit in the determination of saving, capital formation and the price of new investment. Utilising quarterly Australian data, the model is estimated by the method of full information maximum likelihood. Estimates of supply and demand elasticities are presented and discussed. Finally, the model is used to simulate the effects upon the economy over time of anticipated and unanticipated changes in the tariff rate.