Evidence-based Trade Policy Decision Making in Australia and the Development of Computable General Equilibrium Modelling

This paper explains why evidence-based trade policy decision making is heavily reliant on results generated by CGE models and why the development and application of these modelling has been particularly active in Australia. The paper provides a short history of CGE modelling and describes the impetus to the field provided by two factors: (a) the failures of less theoretically formal approaches; and (b) the recognition of the ability of CGE modelling to handle policy-relevant detail. The paper argues that CGE modelling flourished in Australia because Australia had the right issue, the right institutions and the right model.