An Empirical Study On The Influence Of The Free Trade Zone On The Construction Of Four Centers In Shanghai

The number of China's Pilot Free Trade Zones has geographically increased after the establishment of China(Shanghai)Pilot Free Trade Zone in 2013.The quantitative research on the establishment of Free Trade Zones and the spillover effect of policies is an important basis for the implementation of national strategic decision-making,especially the study on the positive effect on the macro-economy as a whole,which is conducive for regulating national economic policies of Free Trade Zones and promoting local economic development.As a national experimental field with deepening economic system reform as the core,the establishment of China(Shanghai)Pilot Free Trade Zone is not only to promote regional economic development,but also to explore the experience that can be replicated in the whole country through the first trial mode.It is the experience accumulation of the establishment of free trade zone and the effective implementation of its regulatory policies through quantitative research on the impact of the establishment of Free Trade Zone on the construction of four centers in Shanghai--International Economic center,International Financial Center,International Shipping Center and International Trade Center,which lays a solid foundation for the establishment of other free trade zones and the designation of relevant economic regulatory policies.The CGE model,as a standard tool for quantitative study of policy effect,can not only analyze the economic effect of free trade zone construction as a whole,but simulates the scenario hypothesis of free trade zone regulation policy.Through effectively balancing SAM and estimating elastic parameter,this study scientifically optimizes the use of CGE model to establish free trade zone and its regulation policy for international ceters in Shanghai.As we know,it's useful to deliever empirical research to analyze the economic effects on national or multinational FTA with CGE models,but few on the central city and its region;moreover,the CGE models'parameters and SAM mostly use other research results,econometrics and cross entropy estimation methods,which has the defects of estimating the negative value from the whole economyThis paper successfully develops the EGRAS method which can effectively reconstruct the SAMs and update the IO tables which include negative initial variables and zero numbers.Meanwhile,we effectively develop the CGE-S AM-EGRAS method to integrate the two tasks of balancing SAM and estimating behavioral parameters including the negative priors.Using the Shanghai's GDP,the shipping output value,the financial output value,and total trade amount,this paper quantitatively depicts the construction effect of international centers in Shanghai.We compile the Shanghai regional SAM and construct the regional CGE model with CGE-S AM-EGR AS balancing SAM s and estimating elastic parameters Most importantly,numerical simulation and optimization research have been taken into practice with the different elastic parameters under the Free Trade Zone's policys--RMB exchange rate marketization and tariff rate adjustmentThe first innovation of this paper is to improve the GRAS method,and creatively develops the EGRAS method which can balance SAMs and update the IO tables with negative initial values.The EGRAS method is constructed to compare with the GRAS method including the AGRAS,UGRAS,SGRAS and IGRAS.Then the method is applied to numerical simulation.Either calculation errors are made or different information gain measures are compared.The numerical results show that EGRAS which is unbiased and convex consistently outperforms both sign-preserving and strictly zero-preserving when increasing and decreasing SAMs' or IO tables' cell values occur together.Moreover,EGRAS can overweigh large errors in small coefficients including Theil's U,AIL,GDM.The research improves GRAS and forms the optimal EGRAS model which unnecessarily defines 0/0 and 0ln0.The global optimal solution can be found.Additionally,the exogenous lower bound of the proportional coefficient variable is infinite,so that the model solution does not define 0ln0 and 0/0,which is convenient for large-scale calculation.By comparing the error index,the EGRAS method can effectively persist the prior information.However,the AGRAS and SGRAS methods completely lose the prior information for balancing SAMs and updating IO tables.When updating the IO table of oosterhaven(2003),the EGRAS mehod mostly contain the prior information and show the lowest loss index which is 0.013,while the AGRAS and SGRAS method obtain the same index Moreover,the EGRAS method successfully gain the lowest information loss index(AIL)which is 0.003 while balancing the Chinese SAM in 2007,but the AGRAS and SGRAS methods have similar effectThe second innovation of this paper is to establish CGE-S AM-EGR AS model which can completely estim ate negative elastic parameters and balance negative SAM s based on the constraints of the optimal allocation of production module and trade module of CGE model by minimizing the statistical measurement pseudo distance from the correction to the unobserved parameters based on the CGE model.The CGE-S AM-EGR AS model can effectively avoid the singleness of econometric parameter estimation methods and the dependence on time series data,and improves the pertinence and scientificity of CGE model parameter estimation.The research improves the optimal CGE-SAM-EGRAS model which unnecessarily makes assumptions about error distribution and successfully solves the global optimal solution.The numerical results show that CGE-SAM-EGRAS method effectively decreases information loss and enhances economic importance while efficiently estimating parameters in CGE model.The elasticity values of CET func tion for agricultural products and service products approach 1 except industrial products Through the optimal modell,the substitution elasticity values of CES production function are greater than 1.Moreover,The Armington substitution elasticity of industrial products is more than 7 times that of agricultural products and nearly 10 times that of service products,which shows that Shanghai has a strong import sensitivity for industrial products,which is consistent with the fact that Shanghai adheres to the innovation driven policy and promotes the implementation of industrial structure adjustment policy,and the scale effect of industrial products imported is the smallest.Although the import sensitivity of service industry is weak,the estimated proportional parameter of service industry is the largest,which conforms to the high-quality development of service industry in ShanghaiThe third innovation of this paper is to establish a basic paradigm for the study of the Free Trade Zone's establishment.We successfully construct the Shanghai's regional CGE model based on Keynes's macro closure conditions and promote the extension of Armington and CET function from binary to ternary which is used to numerical simulation.Through the analysis of the market in Shanghai and the Yangtze River Delta,it has the Keynesian macro-economic closed indicator,that is,the supply of labor and capital has price elasticity,and the supply of factor market is determined by the market demand of the factor;investment and government expenditure are exogenous variables,and the fiscal deficit of Shanghai is allowed.At the same time,the paper pushes the dual subject of Armington condition and CET function to the triple subject,and directly compares the price elasticity of inflow and outflow goods of domestic and foreign accounts.By selecting different elastic parameter estimates from the CGE-S AM-EGR AS method,the calibration variables are the difference between GDPO chk,EGO chk and EINVOchk.The numerical simulation results show that the calibration variables are close to 0,which shows that the CGE model is accurate and can be used for numerical simulationFortrunely,according to the quantitative analysis results,the results of CGE model simulation with different elastic parameter estimates are completely different under the same impact condition,and even the opposite research conclusions are obtained,which shows that the CGE model application research by drawing on the other scholars'parameter estimates should be improved.Although the elastic parameter estimates of production function in simulation 2 and simulation 1 are similar,the import price elasticity of industrial products in Simulation 1 is greater than that of agricultural products and services,while the export price elasticity is equivalent.In simulation 2,the price elasticity of imported goods is equal,while that of industrial goods is smaller than that of agricultural products and service products.The results of simulation 1 and simulation 2 are opposite to those of CGE model,and the change rate of agricultural activity output value of simulation 2 is-3.168,which is not consistent with the actual economic development of Shanghai.The change rate of Shanghai's GDP in simulation 3 is opposite to that in Simulation 1.The simulation 4 and simulation 1 are consistent,but the change rate of specific indicators is different which means that Shanghai agricultural products are completely dependent on imports and Shanghai does not produce agricultural products.The elastic parameters of simulation 3 and simulation 1 are increased.Under the same impact condition,the opposite change of nominal GDP value is obtained.Moreover,the larger the elastic parameter is,the larger the change of supply and demand quantity caused by price change is,and the smaller the nominal GDP value is.The greater the ela stic parameters of Armington condition and CET function,the greater the positive effect on Shanghai's GDP and import and Total trade volumeThis paper successfully analyzes the role of the key indicators of FTZ's exchange rate and tariff rate in the construction of international centers in Shanghai.The single exchange rate control policy of the FTZ has no positive effect on the construction goals of the four centers in Shanghai.Under the background of keeping the tariff rate unchanged,lowering the RMB exchange rate has a negative effect on Shanghai's economy,and with the exchange rate decreasing,Shanghai's nominal GDP value,shipping service output,financial service output and total import and export trade have been increasing.Among them,the decrease of RMB exchange rate by 25%has the most negative effect on Shanghai's GDP,shipping output value,financial output value and Total trade amount with 4.8%/8.6%/7.9%/2.3%respectively.An Evidence of The FTZ's zero tariff and the positive effect of the single tariff exchange rate adjustment policy on the international centers construction in Shanghai are shown by fixing the exogenous exchange rate;moreover,with the continuous tariff reduction,the effect on Shanghai's GDP,shipping output value,financial output value and total trade amount has changed from positive to negative.Among them,the tariff reduction by 80%has the most negative effect on Shanghai's GDP,shipping output value and financial output value with a decrease of 10.7%/18.9%/1 8.4%,which promotes the increase of total trade amount by 16.7%.However,The combination policy of market-oriented exchange rate and tariff reduction in the FTZ can effectively stimulate the economic development of Shanghai and promote the international centers construction in Shanghai,but it is not unlimited.In particular,the economic stimulation effect of zero tariff control policy is limited.With the reduction of tariff rate,the positive role of promoting the Shanghai's GDP,Shipping output value,financial output value and Total trade volume has been strengthened.When the tariff rate is reduced to 10%,the Shanghai's GDP,shipping output value,financial output value and total trade volume are all increased to the maximum by 12.3%/10.8%/12.3%/16.9%.M oreover,the ratio of agricultural activity output,industrial activity output,shipping service output,financial service output and other service output to GDP is-1.9%/-38.2%/0.005%/0.8%/0.7%respectively,which furtherly verifies that the FTZ's establishment effectively promotes the optimization of Shanghai's industrial structureThis paper starts from the deficiencies of various research fields related to the problems and makes a key point on the mechanism of the FTZ's role in the the international centers construction in Shanghai.It finds that the establishment of the FTZ has a positive role in promoting the optimization of Shanghai's industrial structure and the international centers construction.However,there are still some deficiencies which are mainly reflected in two aspects:Firstly,the model only estimates the parameters of the constant elasticity substitution function and utility function.It's difficult to focus on non-constant elasticity substitution function and utility function,and explore the effectiveness of the parameter estimation method in combination with the research object;Secondly,the basic period and time series data of SAM are missing.These two aspects are also the further research directions after this study.