ESTIMATING CES AND CET PARAMETERS FOR VIETNAM ECONOMY USING MAXIMUM ENTROPY APPROACH

Tóm tắt

Faced with this limited information, in order to give the “best” conclusions based on the data at hand and without assumptions about something we do not know, Jaynes (1957) proposed making use of the entropy concept. This paper presents the theoretical concept used to estimate the Constant Elasticity of Substitution (CES) and Constant Elasticity of Transformation (CET) parameters. Applying the maximum entropy method, the study tries to estimate trade parameters, i.e. CES and CET, the value of which are just assumed in many CGE models. We use the static CGE model to find Cross Entropy estimates of parameters. It is the first time that these parameters have been estimated for Vietnam based on the Vietnamese SAM 2007. Because CGE results are sensitive to the value of CES and CETparameters, it is believed that when they are used for simulating in the CGE model, the results will reflect the Vietnamese actual situation more precisely.