NBER Publications by Thomas Hertel

Agricultural and energy commodity prices have traditionally exhibited relatively low correlation. However, recent increases in biofuel production have altered the agriculture-energy relationship in a fundamental way. This increase has drawn on corn previously sold to other uses, as well as acreage devoted to other crops. The US RFS envisions a further boost of ethanol production to 15 billion gallons per year, which might be expected to further strengthen the linkages. We estimate that, in the presence of a binding RFS, the inherent volatility in the US coarse grains market will rise by about one-quarter. And the volatility of the US coarse grains price to supply side shocks in that market will rise by nearly one-half. Under a high oil price scenario, rather than the RFS binding, the b...

Computable General Equilibrium models, widely used for the analysis of Free Trade Agreements (FTAs) are often criticized for having poor econometric foundations. This paper improves the linkage between econometric estimates of key parameters and their usage in CGE analysis in order to better evaluate the likely outcome of a FTA for the Americas. Our econometric work focuses on estimation of the elasticity of substitution among imports from different countries, which is especially critical for evaluating the positive and normative outcomes of FTAs. We match the data in the econometric exercise to the policy experiment at hand. Then we sample from the distribution of parameter values given by our econometric estimates in order to generate a distribution of model results, from which we can co...