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

Adao, Rodrigo, Costinot, Arnaud and Donaldson, Dave (2024) Putting quantitative models to the test: an application to Trump's trade war. CEP Discussion Papers (CEPDP2002). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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).

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2024 The Author(s)
Divisions:	Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation and Selection C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C68 - Computable General Equilibrium Models E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation F - International Economics > F1 - Trade > F10 - General R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R10 - General
Date Deposited:	13 Feb 2025 12:21
Last Modified:	13 Feb 2025 12:21
URI:	http://eprints.lse.ac.uk/id/eprint/126756

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