Economics, Econometrics and Finance
4 years ago

Free Trade Agreement boosts imports and welfare gains worldwide with confidence

Economic Modelling
How confident can we be of CGE-based assessments of Free Trade Agreements?
Thomas W. Hertel, David Hummels, Maros Ivanic, Roman Keeney

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CGE models are often criticized for their weak foundations, but this study improves the link between econometric estimates and CGE analysis to assess the impact of the FTAA. By focusing on the elasticity of substitution among imports, the researchers found that the FTAA leads to increased imports worldwide, with nine out of thirteen regions experiencing a welfare gain with over 95% confidence. This approach combines econometric work with CGE analysis to provide more reliable results for policymakers.