ABSTRACT
Computable general equilibrium (CGE) models are based on inter-industry input-output data, and therefore, are considered useful tools for industrial policy simulations. After all, most of the industrial policies intend to create industrial structural changes, often in favor of targeted sectors, by impacting the inter-industry (productive) resource flows. Multi-sector and multi-country models can also ensure macro-economic consistency, such as balancing investments and savings in a national and/or world/regional context. They are also suited to evaluate the impacts of industrial promotion with international initiatives under the globalizing world economy. This chapter considers taking part in a mega-regional trade agreement (MRTA) as an industrial policy one country can adopt for industrial development. It takes the Regional Comprehensive Economic Partnership (RCEP) as a policy scenario for a CGE simulation. While some industries expand by utilizing the RCEP, other industries contract because of resource constraints. Three features in simulating RCEP are: (1) accommodation of global value chains (GVCs); (2) liberalization of trade in goods and services; and (3) investment measures.
