Applied General Equilibrium Models for Policy Evaluation

• Assoc. Prof. Dr. Mohd Yusof Saari
• Dr. Muhammad Daaniyall Abd Rahman

Computable general equilibrium (CGE) models are increasingly being used for analyzing economy- wide impacts of various policies. These models are useful for analyzing issues where inter-industrial and inter-agent linkages are crucial. CGE models are large numerical models which combine economic theory with real economic data in order to derive computationally the impacts of policies or shocks in the economy. CGE models fit economic data to a set of equations which aim to capture the structure of the economy and behavioural response of agents (firms, households, government). This provides a framework to simulate policy changes and trace the impact on key economic variables, including income and expenditure flows.

This introductory course is designed to introduce participants with information and skills to develop an applied general equilibrium model for economic policy analysis. It is a necessary for the participants of this course to have foundations in input-output analysis. If not, participants that would like to take this course are advised to enrol for the introductory course for input-output analysis.

The course is divided into two parts. The first part introduces the fundamental concept of general equilibrium approach and the social accounting matric (SAM) database that commonly used in practical for developing a computable general equilibrium model. The second part applies the SAM to calibrate all equations and market clearance conditions. Microsoft Excel and General Algebraic Modeling System (GAMS) will be used in the practical and hand-on sessions.