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Assessing Global Computable General Equilibrium Model Validity Using Agricultural Price Volatility
Author(s) -
Valenzuela Ernesto,
Hertel Thomas W.,
Keeney Roman,
Reimer Jeffrey J.
Publication year - 2007
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.00977.x
Subject(s) - computable general equilibrium , economics , volatility (finance) , econometrics , agriculture , general equilibrium theory , macroeconomics , ecology , biology
Computable General Equilibrium (CGE) models are commonly used for global agricultural market analysis. Concerns are sometimes raised, however, about the quality of their output since key parameters may not be econometrically estimated and little emphasis is generally given to model assessment. This article addresses the latter issue by developing an approach to validating CGE models based on the ability to reproduce observed price volatility in agricultural markets. We show how patterns in the deviations between model predictions and validation criteria can be used to identify the weak points of a model and guide development of improved specifications with firmer empirical foundations.