The first part of the book shows how economic sectors can be classified as tradables and non-tradables, how variables of national accounts can be divided into this two-sector economy. Based on this, precise consumption ratio and price ratio (real exchange rate) between tradable to non-tradables can be computed and used for calculation of the elasticity of substitution in consumption using a CES function and time series econometrics. The second part shows how an economy can be divided into tradables and non-tradables but with three goods: exports, imports and domestic production. It is then possible to compute the price ratio of export to domestic good in production and the price ratio of import and domestic good in consumption. These ratios are used to compute elasticities of substitution in production and consumption with time series econometrics, which are used as key parameters in the known simple 1-2-3 CGE model to study the impacts of external shocks in a developing economy. These shocks and its macro impacts are transmitted to households, simulating micro-changes on income, expenditure and poverty indicators for two distant periods.
|Place of Publication||Germany|
|Publisher||Vdm Verlag Dr. Mueller E.K.|
|Number of pages||124|
|Publication status||Published - 11 Dec 2009|