ERI Discussion Paper Series No.81
Diagnostic Analysis of CGE Modeling:
The Property of APEC Trade Liberalization Model

November 1997
Kanemi Ban
(Senior Visiting Fellow, Economic Research Institute, Economic Planning Agency;
Osaka, University)
Kenichi Kawasaki
(The Export-Import Bank of Japan)
Masahiko Tsutsumi
(Economic Planning Agency)


Asia Pacific Economic Cooperation (APEC) is about to embark on an ambitious initiative of realizing free and open trade by 2010/2020. This trade liberalization process will have a significant economic impact on the economies in the APEC region as well as on the world at large. It is important to analyze the economic implications of the initiative.

This paper discusses the application of a CGE model for those areas readily subject to quantitative analysis, such as tariffs and non-tariff measures, which was carried out by the research team in the Economic Research Institute (ERI) with the Economic Planning Agency (EPA) of the Japanese government, who played the role as if one of the Secretariat for the APEC Economic Committee (EC) which was assigned the task of analyzing the impact of trade liberalization in the Asia-Pacific region.

The main part of the paper reports background on building a CGE model, which is used for the specific purpose of the APEC/EC studies. It includes discussions on key theoretical assumptions and relative significance of those assumptions by diagnostic model simulations, in addition to fundamental issues concerning aggregation, data, and parameters. Roles of capital movements, the impact of induced savings and investment, and external scale economies are highlighted.

However, the update of databases in general --applying more recent information on the member economies-- is one remaining issue for improvement of the current model. Given the significance of capital formation in economic effects of trade liberalization, detailed data describing international capital flows in particular would be appreciated.

Structure of the whole text (PDF-Format 2file)

  1. Abstract別ウィンドウで開きます。(PDF-Format 119 KB)
  2. page1
    I. Introduction
  3. page2
    II. Quantitative Analysis on the Effects of Trade Liberalization
    1. page2
      a. Expected Effects of Trade Liberalization
    2. page3
      b. Computable General Equilibrium (CGE) Model
  4. page4
    III. Model Building
    1. page4
      a. Aggregation
    2. page5
      b. Data
    3. page5
      c. Parameters
    4. page7
      d. Key Assumptions
  5. page13
    IV. Conclusions
  6. page19
    Annex: Outline of the GTAP Model
  7. page19
    I. Data
    1. page19
      a. Trade Data
    2. page20
      b. Protection Data
    3. page20
      c. IO Data
  8. page21
    II. Model
    1. page21
      a. Aggregation
    2. page21
      b. Structure
    3. page31
      c. Parameters
  9. Table別ウィンドウで開きます。(PDF-Format 484 KB)
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