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Putting quantitative models to the test: An application to Trump's trade war

Author

Listed:
  • Rodrigo Adao
  • Arnaud Costinot
  • Dave Donaldson

Abstract

The primary motivation behind quantitative modeling in international trade and many other fields is to shed light on the economic consequences of policy changes. To help assess and potentially strengthen the credibility of such quantitative predictions we introduce an IV-based goodness-of-fit measure that provides the basis for testing causal predictions in arbitrary general-equilibrium environments as well as for estimating the average misspecification in these predictions. As an illustration of how to use our IV-based goodness-of-fit measure in practice, we revisit the welfare consequences of Trump's trade war predicted by Fajgelbaum et al. (2020).

Suggested Citation

  • Rodrigo Adao & Arnaud Costinot & Dave Donaldson, 2024. "Putting quantitative models to the test: An application to Trump's trade war," CEP Discussion Papers dp2002, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp2002
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    References listed on IDEAS

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    4. repec:cup:cbooks:9780521825252 is not listed on IDEAS
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    Keywords

    international trade; urban economics; testing economic models;
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