ࡱ> <(@ ,/ 0DArialgsRomanll-a0D-3 00000Romanll-a0 DGaramondRomanll-a00DTimes New Romanll-a0@DWingdingsRomanll-a0PD-3 0fggsRomanll-a0 A .  @n?" dd@  @@`` PDHG,,,,HGHG,,HH..**>>  () 5//HG,,HH//HHHG}//                0AA@8vwʚ;ʚ;g4bdbd` -a0%ppp@ <4dddd8))0lh <4BdBd8K*0l}u___PPT10U pp.4United Nations. 6?  %/3Elasticities for the calibration of the MAMS model "42*(Marco Snchez Development Policy and Analysis Division Department of Economic and Social Affairs United Nations, New York Presentation for the Inception & Training Workshop of the UNDP/UN-DESA/World Bank/LAS Project  Assessing Development Strategies to Achieve the MDGs in the Arab Region , League of Arab States, Cairo, 2-5 April, 2007.RBSB +MAMS elasticities: where can they be found?,,(+ Ideal case scenario Data permit to estimate country-specific elasticities Preferably sector-specific when required and not just national estimates Ideally own estimates can be compared with elasticities available in other studies for the country Borrow elasticities that have been estimated (and not merely used) in other studies Option that is far from ideal and essentially induced by data limitations. Avoid borrowing elasticities from another country s model Worse case scenario Elasticities guessed or computed using some basic operations provided that the required data were available. Educated guesses Careful thinking about the nature of the elasticity and the reality of the country whose economy is being modeled. That is, should one expect a high or low responsiveness to changes in demand, income or relative prices? PPTPPPnPPPTn  Elasticities in the MAMS model(~MAMS specific ones (i.e. MDG elasticities) Determinants for MDG achievement Standard-CGE-model specific elasticities Substitution Transformation Expenditure (consumption) Other elasticities Elasticity of savings rate with respect to per-capita income Elasticity of minimum wage for labor with respect to determinants Elasticity of TFP for activity a with respect to GDP trade share,!)6,!)6  < 4( 6 <'(Standard-CGE-model specific elasticities))((  Since MAMS fundamentally draws from a standard CGE model, its functioning and solution feasibility will heavily depend upon standard-CGE-model specific elasticities. Play a crucial role in the functioning of the model and consequently affect the solution and the results of policy simulations. Armington - elasticity of substitution between imports & domestic output in domestic demand The consumer faces the cost minimization problem of finding the optimal consumption mix between domestically produced goods and imported goods.BZZ' S'  P) CES production technology Elasticity of substitution between aggregate factor & aggregate intermediate Producer minimizes costs by finding the optimal quantity mix between value-added and intermediate consumption Elasticity of substitution between factors Producer minimizes costs by finding the optimal quantity mix factors Constant elasticity of transformation (CET) Elasticity of transformation for domestic marketed output between exports and domestic supplies Producer maximizes profits by finding the optimal combined use of domestic output for domestic market sales and exports Linear Expenditure System Expenditure elasticity of market demand by commodity and household in linear expenditure systemMo,E,`Mo,E ,` K y Q* Relative prices affect the optimal ratio for the mix of all the quantities involved in the producer and the consumer problem, given the functions constraints. The degree of response of quantity ratios to relative price shifts depends on the elasticity values    EEstimating standard-CGE-model specific elasticities using time seriesFF(CES: derive a demand equation system as a first order approximation of a CES function log q = a + b log p + c t (+ dummies) q: quantity ratio of the CES function p: relative price index that measures the ratio of the implicit price deflators of quantities in q t: time trend term that takes into account changes in tastes over time dummies for structural or important policy changes elas = b + 1 a = captures combined effect of elas, the function shift parameter, the function share parameter and relative pricesV&VpR+ CET: export quantity shares of output level respond to relative price shifts in the model. This relationship can be imposed a priori using a restricted form of a complete export supply function. log(qe/qx) = a log 0 - b log(pd/pe)+c et + dummies qe: quantity of exports qd: quantity of output for domestic market qx: quantity of total output pe: price of qe pd: price of qd t: time trend term captures the exogenous change in time dummies for structural or important policy changes b is the elasticity of transformation. a captures the effect of the function share parameter over time4g|? BJBB BB B@B&BB?B4 r S, CLES: income elasticities of demand Logarithmic commodity-wise expenditure demand function using OLS log Cch = b0 + b1 log Yh + e Cch : total consumption of commodity c by household h Yh : total income of household type h b1 : Engel elasticity input to calculate the marginal budget shares of consumption spending in the LESDdrQdJBBJBBJBJBH3@H#@@H@Q B  D T-Data requirements  6Armington Relative price variable builds from: Import price index Producer price index Quantity ratio variable builds from: Import value (including tariff revenue) in current and constant prices Total demand (supply) or gross output value (value added + intermediate consumption) in current and constant pricesb %(% %(%  7 U. CES  production function Employment data (number of occupied workers) GDP at factor cost (current and constant prices) as a proxy of value added) Gross output value (value added + intermediate consumption) Implicit price in GDP at factor cost Labor income CET Export price index Wholesale price index Export value (constant and current) Total demand (supply) or gross output value (value added + intermediate consumption) in current and constant prices LES: household survey data PPPPPPP    V/"What if having to guess or borrow?##( # nGuessing is the last resort option! Make sure these are educated guesses! Use of elasticity values from other models should also be subject to serious scrutiny: are these realistic in order of magnitude for my country? Imagine whether corresponding sectors and economic agents of your country would be at a similar development stage, income level and/or facing similar market conditions and constraints. 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