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Putting Quantitative Models to the Test: An Application to Trump’s Trade War

Author

Listed:
  • Rodrigo Adão
  • 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 Adão & Arnaud Costinot & Dave Donaldson, 2023. "Putting Quantitative Models to the Test: An Application to Trump’s Trade War," CESifo Working Paper Series 10484, CESifo.
  • Handle: RePEc:ces:ceswps:_10484
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10484.pdf
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    References listed on IDEAS

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    Cited by:

    1. Rodrigo Adão & Arnaud Costinot & Dave Donaldson & John A. Sturm, 2023. "Why is Trade Not Free? A Revealed Preference Approach," NBER Working Papers 31798, National Bureau of Economic Research, Inc.
    2. Bartelme, Dominick & Lan, Ting & Levchenko, Andrei A., 2024. "Specialization, market access and real income," Journal of International Economics, Elsevier, vol. 150(C).

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    More about this item

    Keywords

    model testing and validation; computational general equilibrium; international trade; economic geography;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • F10 - International Economics - - Trade - - - General
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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