International Trade II
Computational Modeling
of Trade Policy

Prof. dr. J.F. Francois, Johannes Kepler University (Linz) & CEPR
email:             joseph.francois@jku.at
internet:          http://www.i4ide.org/francois/ 

Note: The syllabus is available electronically from my web site. 

All readings are linked from Prof Francois’ website. Supplementary information is also provided on the web site for this course.  This includes copies of powerpoint slides.

EMAILS:  Please limit emails.

Overview:

This course is devoted to the analysis (theoretical and applied) of international trade and its relationship to trade policy. Emphasis is placed on exposing students to the quantitative tools now used in policy institutions to examine these issues. Increasingly, these are computational models, known as applied partial equilibrium (PE) and computable general equilibrium (CGE) models. These approaches have become a major tool of policy analysis and are widely used in policy research, not only for international trade, but also for public finance (tax policy) and for macroeconomic policy. This course aims at a basic understanding of these tools. The students are required to carry out practical exercises with a computer.  Course materials (exercises, models, etc.) will be posted for student download. This is a Master's level course. A more advanced set of material, building on what is covered here, is available at this link: http://www.intereconomics.com/handbook/CPM.htm 

Course Structure and Grading:

The course consists of lectures and computer lab assignments. Afterwards, students make group presentations of group computational policy papers. These term papers will be presented to, and discussed by the entire class during the final weeks of the term. 

Grading: Presence in class is required.
Group Paper and Presentation 50%
Exam 50%
Remark: students are expected to work in groups. Groups are also allowed for the problem sets. 

General guidelines for the paper can be downloaded as a Word file: http://www.intereconomics.com/students/Student_Papers.doc
The group paper follows from a group application involving a trade policy issue like sugar trade, cotton subsidies, steel safeguards in the US, textile and clothing quotas, or something of the sort.  The take-home exam and the paper are both due on May 31.  

SCHEDULE:

24-APRIL

 

 

 

Registration, organization, introductory lecture

 

A.)    Partial equilibrium I :       powerpoint slides A
                                    powerpoint slides B

                                                               i.       Perfect substitute models

                                                             ii.      Armington models    

            Readings: [1], [2]

24-APRIL

 

 

 

Lecture, group assignments

 

B.)    Partial equilibrium II :      powerpoint slides C 

                                                               i.      Armington models

                                                             ii.      The GSIM model    

            Readings: [2], [3] 

25-APRIL

 

 

 

 

Lecture

 

C.)    Partial equilibrium III  

                                                               i.      The GSIM model

                                                             ii.      Quotas and market power    

            Readings: [2], [3]

The Quota model (excel) and the documentation.

 

D.)    General equilibrium:       powerpoint slides D

                                                               i.      The 123 model

                                                             ii.      Multi-sector models    

            Readings: [4], [5], [6]

 

            PROBLEM SET IS DISCUSSED

9-MAY

 

 

 

 

 

Lecture

 

E.)    Quantifying Policies:      powerpoint slides F

                                                               i.      Measuring import protection

                                                             ii.      Analyzing trade agreements

 

            Readings: [9], [10], [11]

           

9-MAY

Group Presentations

18-JUNE

 

 

Final papers are due


 

Readings

[1] Finger, M. (1981), "Policy Research," Journal of Political Economy 89(61).

[2] Francois, J.F. and H.K. Hall (1997), "Partial Equilibrium Modelling," in J.F. Francois and K.A. Reinert, eds., Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press.

[3] Francois, J.F. and H.K. Hall, "Global Simulation Analysis of Industry-Level Trade Policy," mimeo (World Bank), 2003.

[4] Devarajan, S. et al (1997), "Simple General Equilibirum Models," in J.F. Francois and K.A. Reinert, eds., Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press.

[5] Kehoe, T.J., "Social Accounting matrices and Applied General Equilibrium Models," Federal Reserve Bank of Minneapolis Working Paper 563, January 1996.

[6] Kehoe, P.J. and T.J. Kehoe, "A Primer on Static General Equilibrium Models," Federal Reserve Bank of Minneapolis Quarterly Review, Spring 18(1), 1994.

[7] Hertel, T.W, and M. Tsigas (1996), "The GTAP Model," Chapter 2 in T. Hertel, ed. Global Trade Policy Analysis, Cambridge University Press.

[8] Francois, J.F., B.J. McDonald, and H. Nordstrom (1997), "Capital Accumulation in Applied Trade Models," in J.F. Francois and K.A. Reinert, eds., Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press, 1997.

[9] Francois, J.F., and D.W. Roland-Holst (1997), "Scale Economies and Imperfect Competition," in J.F. Francois and K.A. Reinert, eds., Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press, 1997.

[10] Laird, S. (1997), “Quantifying Commercial Policies,” in J.F. Francois and K.A. Reinert, eds., Applied Methods for Trade Policy Analysis: A Handbook, Cambridge University Press, 1997.

[11] Francois, J.F. and W. Martin (2003), "Formula Approaches to Market Access Negotiations," World Economy.

[12] Francois, J. and J. Woerz (2006) "Rags in the High Rent District: The Evolution of Quota Rents in Textiles and Clothing," Tinbergen Institute and CEPR discussion paper.

Models, Exercises, Data, and Links

  • Table of Models to Download
    This is a table of various computational models of trade policy. All the models we are working with can be downloaded from here.

  • Data for group projects
    This is a spreadsheet with data for the group project    . I will modify/expand it after discussion.

  • http://www.ifpri.org/
    The international food policy research institute