Ng'eno, N. Kipkoech (1990) Trade liberalisation in small open economies : the case of Kenya. PhD thesis, University of Warwick.

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Abstract

The object of this thesis is to determine the consequences
of trade liberalisation on the Kenyan economy. This is done by
simulating the effects of tariff reduction, devaluation of domestic
currency and export subsidies. In addition, the effects of
quantitative controls and markup pricing are simulated. The structure
of the economy is modelled through the specification of alternative
closure rules.
Policy changes are simulated using a computable general
equilibrium model (CGE). A nine sector model based on a Social
Accounting Matrix is constructed using the TV-approach to modelling
introduced by Drud, Grais and Pyatt (1986). We depart from
neoclassical models, and therefore other CGE models of Kenya, by
assuming product differentiation between domestic goods and imports
and between gross output sales to domestic and export markets. Our
model is essentially Keynesian but for comparative purposes,
neoclassical closures are specified in some simulations.
In general, the basic argument for or against trade
liberalisation concerns its contribution to economic growth. The
neoclassicals argue that by improving efficient allocation of
resources, liberalisation stimulates higher economic growth. The
structuralists, on the other hand, argue that because of structural
rigidities in LDC economies and because of unfavourable international
conditions, liberalisation will have minimal effect on economic growth.
CGE models are useful in sorting out these arguments. It should be
noted however that the assumptions underlying these models often
reflect the modeller's view about the structure of the economy. The
usefulness of CGE models for policy purposes will therefore depend on
how realistic they reflect the structure of the economy being
modelled.
The results of our model show that the gains from trade
liberalisation, in terms of the growth of real GDP, are low. This
applies to both neoclassical and Keynesian closures. However, it is
shown that changes in returns to factors, consumption levels and
aggregate price levels, depending on the closure adopted, are
significant. This is also true for the policy effects on exports,
imports and on the prices and quantities at the sectoral level. These
results reinforce the view that for policy purposes it is important
that the model being used reflects the structure of the economy under
consideration. It also means that it will not make sense to have
tailor made policy recommendations for all LDCs.

Item Type:	Thesis or Dissertation (PhD)
Subjects:	H Social Sciences > HC Economic History and Conditions
Library of Congress Subject Headings (LCSH):	Free trade -- Kenya, Kenya -- Economic conditions, Kenya -- Economic policy -- Econometric models
Official Date:	February 1990
Dates:	Date Event February 1990 Submitted
Institution:	University of Warwick
Theses Department:	Department of Economics
Thesis Type:	PhD
Publication Status:	Unpublished
Supervisor(s)/Advisor:	Roe, Alan, 1942-
Sponsors:	Ford Foundation
Extent:	[7], 288 leaves
Language:	eng
URI:	http://wrap.warwick.ac.uk/id/eprint/34795

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