Computable General Equilibrium Models and Their Use in Economy-Wide Policy Analysis

Joint Program Technical Note
Computable General Equilibrium Models and Their Use in Economy-Wide Policy Analysis
Sue Wing, I. (2004)
Joint Program Technical Note, 50 pgs

Note #6 [Download]

Abstract/Summary:

This paper is a simple, rigorous, practically-oriented exposition of computable general equilibrium (CGE) modeling. The general algebraic framework of a CGE model is developed from microeconomic fundamentals, and employed to illustrate (i) how a model may be calibrated using the economic data in a social accounting matrix, (ii) how the resulting system of numerical equations may be solved for the equilibrium values of economic variables, and (iii) how perturbing this equilibrium by introducing tax or subsidy distortions facilitates analysis of policies' economy-wide impacts.

Citation:

Sue Wing, I. (2004): Computable General Equilibrium Models and Their Use in Economy-Wide Policy Analysis. Joint Program Technical Note TN #6, 50 pgs (http://globalchange.mit.edu/publication/13808)
  • Joint Program Technical Note
Computable General Equilibrium Models and Their Use in Economy-Wide Policy Analysis

Sue Wing, I.

50 pgs
2004

Abstract/Summary: 

This paper is a simple, rigorous, practically-oriented exposition of computable general equilibrium (CGE) modeling. The general algebraic framework of a CGE model is developed from microeconomic fundamentals, and employed to illustrate (i) how a model may be calibrated using the economic data in a social accounting matrix, (ii) how the resulting system of numerical equations may be solved for the equilibrium values of economic variables, and (iii) how perturbing this equilibrium by introducing tax or subsidy distortions facilitates analysis of policies' economy-wide impacts.