Modelling the Impact of Trade Liberalisation: A critique of computable general equilibrium models

Publication date

01 Jul 2006

Share publication

This hard-hitting research report presents a rigorous critique of the most widely used trade models based on computable general equilibrium (or CGE) models. The authors present concise analytical arguments explaining the fundamental weaknesses of 'typical' CGE models. They show that these models tend to make unrealistic assumptions about the macro-economy and do not allow an accurate estimation of the welfare gains that trade liberalisation is supposed to induce. The report appeals for 'honest' simulation strategies showing a variety of possible outcomes, which would enable policy-makers to assess the different scenarios for themselves.