Monitor Vol 39 08_Final_Nov08.pdf - tips
Monitor Vol 39 08_Final_Nov08.pdf - tips
Monitor Vol 39 08_Final_Nov08.pdf - tips
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trade<br />
policy<br />
19<br />
Global Trade Models<br />
and Economic Policy<br />
Analyses:<br />
Relevance, Risks and Repercussions<br />
for Africa 1<br />
Trade & Industry <strong>Monitor</strong><br />
Hakim Ben Hammouda and Patrick N. Osakwe 2<br />
1. Introduction<br />
Since the Uruguay Round, computable general equilibrium (CGE) models have frequently formed<br />
the basis for policy advice and recommendations to developing countries on the potential impact<br />
of multilateral trade liberalisation on their economies. Such models allow researchers to provide a<br />
quantitative estimate of the potential economic consequences of different trade liberalisation scenarios,<br />
including the impact on welfare, trade flows, prices, consumption and production. Because<br />
they adopt a multi-sector and multi-region general equilibrium framework, they are also able to<br />
capture interactions of different sectors and markets in a given economy and at the international<br />
level. 3 This ability to provide a systematic representation of national economies and their links<br />
and interactions with the global economy explains their attraction and widespread use for trade<br />
policy analysis.<br />
1<br />
This article was first published in Development Policy Review, 20<strong>08</strong>, 26 (2).<br />
2<br />
Trade, Finance and Economic Development Division, UN Economic Commission for Africa, Addis Ababa, Ethiopia<br />
(email: posakwe@uneca.org). An earlier version of this article under a different title was presented at the Carnegie<br />
Endowment for International Peace meeting on ‘Modeling the Impact of Global Trade Policies on Africa: An Expert<br />
Workshop’ held in Bellagio, Italy, 22-24 March, 2006. The authors thank participants at the workshop, especially Sherman<br />
Robinson and Sandra Polaski, for useful discussions and comments. The views expressed here are those of the authors<br />
and should not be attributed to the UN Economic Commission for Africa.<br />
3<br />
It should be noted that not all CGE models are multi-region. Country-specific models have also been used to assess the<br />
impact of trade liberalisation. See, for example, Stifel and Thorbecke (2003).<br />
Computable general equilibrium (CGE) models<br />
are widely used for trade policy analyses and<br />
recommendations. There is, however, increasing<br />
discomfort with the use of these models, especially<br />
in Africa. This article demonstrates that the results<br />
of several such studies of the impact of trade<br />
reforms in Africa differ drastically in terms of both<br />
magnitude and direction, failing to take account of<br />
key features of African economies. It also outlines<br />
potential consequences of the misuse of CGE<br />
models for policy evaluation and suggests pitfalls<br />
to be avoided.