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Abstract

This paper takes the mini USAGE model developed by Dixon and Rimmer (2005) and modifies it in order to better mimic the expected adjustment path following a tariff reduction. Results from the adjusted model are compared against the standard model. It is found that while the standard model does a good job of capturing the expected long-run behaviour of the economy in response to this shock, the adjustment path is not appropriate. However, with a few relatively straight forward changes, the standard model can produce both satisfactory long-run outcomes and a more plausible adjustment path. These changes are documented in an appendix and are considered applicable to a wide range of models currently in use.

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