MODELING A NORTH-AMERICAN FREE-TRADE AREA - ESTIMATION OF FLEXIBLE FUNCTIONAL FORMS

This paper provides estimates of the almost ideal demand system as applied to U.S. imports from Canada, Mexico, the rest of the world, and competing domestic output. Quarterly data over 1980-88 and for 19 mining and manufacturing sectors are used. Implications of adding up, homogeneity, symmetry, and negativity are considered. The econometric results should guide applied general equilibrium modeling of a North American Free Trade Area, especially with regard to potential terms-of-trade effects.