PDF Ebook Computable General Equilibrium Analysis: Opening a Black Box
Computable general equilibrium models play an important role in applied economic research. These models accommodate the micro-consistent systematic analysis of complex economic problems where analytical solutions are either not available or do not provide adequate information. However, the computational approach to economic policy analysis also has severe shortcomings of its own. In general, scientific publications include a complete listing of neither the algebraic model underlying the numerical simulation nor the data used to calibrate model parameters. Even if the model algebra and the data were fully laid out, replication of results would still require specialized programming skills. As a consequence, CGE analyses are often perceived as a black box to non-expert readers.
This article aims at lowering the barriers to numerical CGE analysis along two lines. First, we provide a compact introduction to recent methods of CGE model implementation that may substantially ease entry for potential modelers. Second, and equally important, we illustrate the non-technical access to CGE analysis by means of a user-friendly interface that allows non-modelers to test and develop their economic intuition on general equilibrium interactions without programming skills.
Quantitative simulations to evaluate alternative policy measures play a key role in applied economic research. Numerical models accommodate the systematic analysis of economic problems where analytical solutions are either not available or do not provide adequate information. Compared to analytical models, the numerical approach facilitates the analysis of complex economic interactions and the impact assessment of structural policy changes.
Among numerical methods, computable general equilibrium (CGE) models are widely employed by various national and international organizations (EU Commission, IMF, World Bank, OECD, etc.) for economic policy analysis at the sector-level as well as the economy-wide level.1 The main virtue of the CGE approach is its micro-consistent representation of price-dependent market interactions. The simultaneous explanation of the origin and spending of the agents' income makes it possible to address both economy-wide efficiency as well as distributional impacts of policy interference. This has made CGE models a standard tool for the quantitative analysis of policy interference in many domains including fiscal policy, trade policy, and environmental policy.
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PDF Ebook Computable General Equilibrium Analysis: Opening a Black Box
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