229:
change. The dynamic elements may arise from partial adjustment processes or from stock/flow accumulation relations: between capital stocks and investment, and between foreign debt and trade deficits. However there is a potential consistency problem because the variables that change from one equilibrium solution to the next are not necessarily consistent with each other during the period of change. The modeling of the path of adjustment may involve forward-looking expectations, where agents' expectations depend on the future state of the economy and it is necessary to solve for all periods simultaneously, leading to full multi-period dynamic CGE models. An alternative is recursive dynamics. Recursive-dynamic CGE models are those that can be solved sequentially (one period at a time). They assume that behaviour depends only on current and past states of the economy. Recursive dynamic models where a single period is solved for, comparative steady-state analysis, is a special case of recursive dynamic modeling over what can be multiple periods.
221:: they model the reactions of the economy at only one point in time. For policy analysis, results from such a model are often interpreted as showing the reaction of the economy in some future period to one or a few external shocks or policy changes. That is, the results show the difference (usually reported in percent change form) between two alternative future states (with and without the policy shock). The process of adjustment to the new equilibrium, in particular the reallocation of labor and capital across sectors, usually is not explicitly represented in such a model.
112:(SAM). In either case, it covers the whole economy of a country (or even the whole world), and distinguishes a number of sectors, commodities, primary factors and perhaps types of households. Sectoral coverage ranges from relatively simple representations of capital, labor and intermediates to highly detailed representations of specific sub-sectors (e.g., the electricity sector in GTAP-Power.)
159:'s 1960 MSG model of Norway, and the static model developed by the Cambridge Growth Project in the UK. Both models were pragmatic in flavour, and traced variables through time. The Australian MONASH model is a modern representative of this class. Perhaps the first CGE model similar to those of today was that of Taylor and Black (1974).
97:. The choice of which variables are to be exogenous is called the model closure, and may give rise to controversy. For example, some modelers hold employment and the trade balance fixed; others allow these to vary. Variables defining technology, consumer tastes, and government instruments (such as tax rates) are usually exogenous.
209:. They can show economic gains and losses across different groups (e.g., households that differ in income, or in different regions). The equations include assumptions about the behavioural response of different groups. By optimising the prices paid for various outputs the direct burdens are shifted from one taxpayer to another.
225:
broad approaches followed in the policy literature to such long-run adjustment. One involves what is called "comparative steady state" analysis. Under such an approach, long-run or steady-state closure rules are used, under either forward-looking or recursive dynamic behavior, to solve for long-run adjustments.
228:
The alternative approach involves explicit modeling of dynamic adjustment paths. These models can seem more realistic, but are more challenging to construct and solve. They require for instance that future changes are predicted for all exogenous variables, not just those affected by a possible policy
224:
In contrast, long-run models focus on adjustments to the underlying resource base when modeling policy changes. This can include dynamic adjustment to the labor supply, adjustments in installed and overall capital stocks, and even adjustment to overall productivity and market structure. There are two
167:
CGE models are useful whenever we wish to estimate the effect of changes in one part of the economy upon the rest. For example, a tax on flour might affect bread prices, the CPI, and hence perhaps wages and employment. They have been used widely to analyse trade policy. More recently, CGE has been a
151:
CGE models derive too from the models for planning the economies of poorer countries constructed (usually by a foreign expert) from 1960 onwards. Compared to the
Leontief model, development planning models focused more on constraints or shortages—of skilled labour, capital, or foreign exchange.
461:. Edenhofer, O., R. Pichs-Madruga, Y. Sokona, E. Farahani, S. Kadner, K. Seyboth, A. Adler, I. Baum, S. Brunner, P. Eickemeier, B. Kriemann, J. Savolainen, S. Schlömer, C. von Stechow, T. Zwickel and J. C. Minx (eds.). Cambridge University Press, Cambridge, United Kingdom and New York
192:
data are scarce or not relevant (perhaps because of disturbances such as regime changes). Here, strong, reasonable, assumptions embedded in the model must replace historical evidence. Thus developing economies are often analysed using CGE models, such as those based on the
148:, but assign a more important role to prices. Thus, where Leontief assumed that, say, a fixed amount of labour was required to produce a ton of iron, a CGE model would normally allow wage levels to (negatively) affect labour demands.
53:
CGE models are useful whenever we wish to estimate the effect of changes in one part of the economy upon the rest. They have been used widely to analyse trade policy. More recently, CGE has been a popular way to estimate the
70:
in spirit, often assuming cost-minimizing behaviour by producers, average-cost pricing, and household demands based on optimizing behaviour. However, most CGE models conform only loosely to the theoretical
119:
parameters that capture behavioural response. For example, export demand elasticities specify by how much export volumes might fall if export prices went up. Other elasticities may belong to the
261:
are also used. Use of such systems has lowered the cost of entry to CGE modelling; allowed model simulations to be independently replicated; and increased the transparency of the models.
46:) models. A CGE model consists of equations describing model variables and a database (usually very detailed) consistent with these model equations. The equations tend to be
127:, which show whether products of different countries are close substitutes, and elasticities measuring how easily inputs to production may be substituted for one another.
451:
Kolstad C., K. Urama, J. Broome, A. Bruvoll, M. Cariño Olvera, D. Fullerton, C. Gollier, W. M. Hanemann, R. Hassan, F. Jotzo, M. R. Khan, L. Meyer, and L. Mundaca, 2014:
458:
AR5 Climate Change 2014: Mitigation of
Climate Change. Contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change
895:
176:
CGE models have been used widely to analyse trade policy. Today there are many CGE models of different countries. One of the most well-known CGE models is global: the
66:
A CGE model consists of equations describing model variables and a database (usually very detailed) consistent with these model equations. The equations tend to be
770:
237:
Early CGE models were often solved by a program custom-written for that particular model. Models were expensive to construct and sometimes appeared as a '
809:
50:
in spirit, often assuming cost-minimizing behaviour by producers, average-cost pricing, and household demands based on optimizing behaviour.
439:
194:
104:
tables of transaction values, showing, for example, the value of coal used by the iron industry. Usually the database is presented as an
89:
CGE models always contain more variables than equations—so some variables must be set outside the model. These variables are termed
644:
The
Expected Benefits of Trade Liberalization for World Income and Development: Opening the "Black Box" of Global Trade Modeling
850:
and John
Whalley (1984). "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey".
361:
736:
404:
Taylor, L. and S. L. Black (1974), "Practical
General Equilibrium Estimation of Resources Pulls under Trade Liberalization",
389:
582:
890:
206:
120:
55:
715:
Evidence-based Trade Policy
Decision Making in Australia and the Development of Computable General Equilibrium Modelling
760:
637:
406:
842:
657:
558:
503:
242:
852:
382:
Dynamic
General Equilibrium Modelling for Forecasting and Policy: a Practical Guide and Documentation of MONASH
664:
530:
452:
205:
CGE models can specify consumer and producer behaviour and ‘simulate’ effects of climate policy on various
830:
625:
621:
534:
479:
475:
471:
128:
43:
793:
Lanz, Bruno and
Rutherford, Thomas F. (2016) "GTAPinGAMS: Multiregional and Small Open Economy Models".
94:
786:
109:
696:
526:
377:
141:
105:
67:
47:
538:
483:
168:
popular way to estimate the economic effects of measures to reduce greenhouse gas emissions.
124:
302:
Manne, Alex S. (1963). "Key
Sectors of the Mexican Economy, 1960–1970". In Alan S. Manne;
289:
79:
non-market clearing, especially for labour (unemployment) or for commodities (inventories)
8:
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72:
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90:
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145:
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35:
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241:' to outsiders. Now, most CGE models are formulated and solved using one of the
822:
718:
27:
643:
884:
766:
753:
Global Trade
Analysis: Modeling and Applications (Modelling and Applications)
342:
156:
116:
31:
802:
684:
611:
38:, technology or other external factors. CGE models are also referred to as
847:
821:
Center for Economic Policy Analysis (SCEPA) and Department of Economics,
672:
616:
Income Distribution Policy in Developing Countries: A Case Study of Korea
189:
662:
Cardenete, M. Alejandro, Guerra, Ana-Isabel and Sancho, Ferran (2012).
326:
874:
706:
Dixon, Peter; Brian Parmenter; Alan Powell and Peter Wilcoxen (1992).
456:
238:
188:
CGE models are useful to model the economies of countries for which
484:"Trade liberalization and investment in a multilateral framework"
309:
Studies in Process Analysis: Economy-Wide Production Capabilities
246:
307:
432:
Löfgren, Hans; Rebecca Lee Harris and Sherman Robinson (2002).
258:
811:
Debunking the Myths of Computable General Equilibrium Models
212:
708:
Notes and Problems in Applied General Equilibrium Economics
250:
177:
689:
Dervis, Kemal; Jaime de Melo and Sherman Robinson (1982).
85:
demands not influenced by price (e.g., government demands)
699:; Brian Parmenter; John Sutton and Dave Vincent (1982).
784:(1995) Edited volume on "Applied General Equilibrium",
771:"A Primer on Static Applied General Equilibrium Models"
435:
A Standard Computable General Equilibrium (CGE) in GAMS
290:"GTAP Data Bases: GTAP 10 Satellite Data and Utilities"
701:
ORANI: A Multisectoral Model of the Australian Economy
131:
shows how household demands respond to income changes.
835:
Applied Methods for Trade Policy Analysis: A Handbook
650:
Introduction to Computable General Equilibrium Models
34:
to estimate how an economy might react to changes in
775:
Federal Reserve Bank of Minneapolis Quarterly Review
488:
Dynamic Issues in Applied Commercial Policy Analysis
93:; the remainder, determined by the model, is called
746:
The Structure of Applied General Equilibrium Models
729:
Handbook of Computable General Equilibrium Modeling
453:"Social, Economic and Ethical Concepts and Methods"
545:. Cambridge: Cambridge University Press: 383–434.
490:. Cambridge: Cambridge University Press: 202–222.
896:Mathematical and quantitative methods (economics)
691:General Equilibrium Models for Development Policy
882:
525:
421:Global Trade Analysis: Modeling and Applications
155:CGE modelling of richer economies descends from
58:of measures to reduce greenhouse gas emissions.
755:, Cambridge University Press: Cambridge, 1999,
652:, Cambridge University Press: Cambridge, 2011,
82:imperfect competition (e.g., monopoly pricing)
438:, Microcomputers in Policy Research, vol. 5,
665:Applied General Equilibrium: An Introduction
630:Dynamic Issues in Commercial Policy Analysis
440:International Food Policy Research Institute
349:, North-Holland (2nd enlarged edition 1974).
376:
75:paradigm. For example, they may allow for:
580:
543:Applied Methods for Trade Policy Analysis
347:A Multi-Sectoral Study of Economic Growth
316:Monograph no. 18). John Wiley & Sons.
213:Comparative-static and dynamic CGE models
470:
331:A Demonstration Planning Model for India
183:
883:
859:Shoven, John and John Whalley (1992).
292:, Global Trade Analysis Project (GTAP)
301:
877:– software for DSGE and CGE modeling
837:. Cambridge University Press, 1997.
632:. Cambridge University Press, 1999.
795:Journal of Global Economic Analysis
677:Journal of Global Economic Analysis
121:constant elasticity of substitution
13:
731:, vols. 1A and 1B, North Holland,
673:The Standard GTAP Model, Version 7
671:Corong, Erwin L.; et al. (2017). "
604:
539:"Dynamics of Trade Liberalization"
407:Journal of International Economics
333:, Asia Publishing House, Calcutta.
140:CGE models are descended from the
100:A CGE model database consists of:
14:
907:
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200:
808:Mitra-Kahn, Benjamin H. (2008).
61:
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853:Journal of Economic Literature
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410:, vol. 4(1), April, pp. 37–58.
398:
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20:Computable general equilibrium
1:
614:and Sherman Robinson (1978).
423:, Cambridge University Press.
276:
232:
863:, Cambridge University Press
861:Applying General Equilibrium
693:. Cambridge University Press
551:10.1017/CBO9781139174824.015
496:10.1017/CBO9780511599101.008
7:
744:and Michiel Keyzer (1997).
618:, Stanford University Press
264:
129:Income elasticity of demand
44:applied general equilibrium
10:
912:
891:General equilibrium theory
719:Working Paper Number G-163
419:Hertel, Tom (ed.) (1997).
380:; Rimmer, Maureen (2002).
135:
856:, vol. 22(3) 1007–51
829:Reinert, Kenneth A., and
817:. Working Paper 2008-01.
123:class. Amongst these are
359:Cambridge Growth Project
110:social accounting matrix
26:) models are a class of
16:Class of economic models
642:Bouët, Antoine (2008).
384:. Amsterdam: Elsevier.
803:10.21642/JGEA.010201AF
780:Kehoe, Timothy J. and
765:Kehoe, Patrick J. and
685:10.21642/JGEA.020101AF
474:; et al. (1999).
180:model of world trade.
125:Armington elasticities
713:Dixon, Peter (2006).
537:; K. Reinert (eds.).
527:Keuschnigg, Christian
217:Many CGE models are
184:Developing economies
622:Baldwin, Richard E.
271:Macroeconomic model
142:input–output models
73:general equilibrium
831:Joseph F. Francois
797:, vol. 1(2):1–77.
782:Edward C. Prescott
626:Joseph F. Francois
583:"The Simplest CGE"
364:2009-02-28 at the
304:Harry M. Markowitz
249:software systems.
219:comparative static
106:input-output table
742:Ginsburgh, Victor
737:978-0-444-59568-3
725:Dale W. Jorgenson
723:Dixon, Peter and
648:Burfisher, Mary,
391:978-0-444-51260-4
314:Cowles Foundation
207:economic outcomes
903:
826:
816:
767:Timothy J. Kehoe
751:Hertel, Thomas,
679:. 2 (1): 1–119.
598:
597:
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585:. Archived from
581:Joshua Elliott.
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146:Wassily Leontief
56:economic effects
30:that use actual
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703:, North-Holland
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823:The New School
805:
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480:J. Francois
190:time series
885:Categories
668:. Springer
593:2011-05-23
476:R. Baldwin
327:Sandee, J.
277:References
233:Techniques
95:endogenous
239:black box
91:exogenous
819:Schwartz
533:(1997).
482:(eds.).
362:Archived
345:(1960).
329:(1960),
306:(eds.).
265:See also
108:or as a
833:, eds.
777:, 18(2)
769:(1994)
628:, eds.
566:9 March
511:9 March
247:GEMPACK
136:History
841:
759:
735:
656:
636:
624:, and
557:
502:
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259:MATLAB
36:policy
875:gEcon
815:(PDF)
255:Excel
195:IFPRI
839:ISBN
757:ISBN
733:ISBN
654:ISBN
634:ISBN
568:2019
555:ISBN
513:2019
500:ISBN
386:ISBN
257:and
251:AMPL
243:GAMS
178:GTAP
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