Numerical Simulation and the Neoclassical Theory of Commercial Policy

John Gilbert
    We present a numerical simulation model, in Excel, that can be used to demonstrate many of the fundamental results from the neoclassical theory of commercial policy. The model is general equilibrium, implemented numerically and graphically, and is unique in that it allows the 'closure' of the model to be easily altered by the user. This feature allows the model to be the basis of experimental assignments on, among other topics, quantitative restrictions and the theory of non-economic objectives. By exploring the simulation, students can discover for themselves the deleterious effects of various forms of trade intervention, and the optimal responses to various non-economic objectives. Keywords: Commercial policy, non-economic objectives, computer-assisted instruction JEL: A20, F13