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Hodjat Ghadimi
Associate Professor
School of Design & Community Development
Davis College
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CGE Modeling and Applications: A Short Course

Hodjat Ghadimi, Research Associate Professor at the Regional Research Institute, West Virginia University, has prepared a CGE Short Course as a resource for public use. While most of the slides are self explanatory and general, some of them will not be relevant to specific users. However, because these notes are used as a resource for the course module at WVU, we have retained the entire set rather than purging selected slides.

Following input-output method and social accounting matrix (SAM), this short course concentrates on a more comprehensive tool of analysis, the one that is based on Computable General Equilibrium (CGE) models. The objective is to provide an understanding of the economic logic underlying CGE models, present basic steps in constructing and implementing, and review applications of these models.

Class Outline:

Session 1 -- THEORY (Basic Concept of CGE Models)

Session 2 -- SPECIFICATION (From Stylized to Applied Models)

Session 3 -- IMPLEMENTATION (Database, Calibration, GAMS)

Session 4 -- EXTENSIONS - APPLICATIONS

Session 1: THEORY (Basic concept of CGE models)

  • What are CGE models?

  • A brief review: A survey of surveys

  • Modeling framework comparison

  • The structure of a CGE model

SLIDE PRESENTATION (1)

Readings:

  • Devarajan, Shantayanan, Jeffrey D. Lewis, and Sherman Robinson. Getting the Model Right: The General Equilibrium Approach to Adjustment Policy. Unpublished manuscript, Chapter 1.
  • Devarajan, S., J. Lewis and S. Robinson. 1990. Policy Lessons from Two-Sector Models, Journal of Policy Modeling, 12(4): 625-657.
  • Ghadimi, H. 2006. A Dynamic CGE Analysis of Exhaustible Resources: The Case of an Oil Exporting Developing Country. Regional Research Institute, West Virginia University, Research Paper #2006-7.

Optional Reading:

  • Decaluwe, B. and A. Martens. 1988. CGE Modeling and Developing-Economies - A Concise Empirical Survey of 73 Applications to 26 Countries. Journal of Policy Modeling, 10:4, pp. 529-68.
  • Dinwiddy, C. L., and F.J. Teal. 1988. The Two-Sector General Equilibrium Model: A New Approach. Philip Allan/ St. Martin’s Press.
  • Isard, W., and Iwan Azis. 1999. Applied General Interregional Equilibrium, in Walter Isard et.al, Methods of Interregional and Regional Analysis, Ashgate, England, pp 333-400.
  • Robinson, Sherman. 1989. Multisector Models of Developing Countries: A Survey, in H.B. Chenery and T.N. Srinivasan, eds., Handbook of Development Economics. Amsterdam: North Holland. pp. 906-932.
  • Shoven, J.B. and J.L. Whalley. 1992. Applying General Equilibrium, Cambridge:Cambridge University Press.
  • Shoven, J.B., and J. Whalley. 1984. Applied General Equilibrium Models of Taxation and International Trade: An Introduction and Survey. Journal of Economic Literature 22: 1007-1051.

Session 2: SPECIFICATION (From Stylized to Applied)

  • A taxonomy of models
  • Components of a simple CGE
  • Mathematical model statement

SLIDE PRESENTATION (2)

Readings:

  • Devarajan, S., D. Go, J. Lewis, S. Robinson, and P. Sinko. 1997. Simple General Equilibrium Modeling, in J. Francois and K. Reinert, eds., Applied Methods for Trade Policy Analysis, Cambridge University Press.
  • Lofgren et al. 2002. A Standard Computable General Equilibrium (CGE) Model in GAMS. International Food Policy Research Institute (IFPRI).

Optional Reading:

  • Ginsburgh, V. and M. Keyzer. 1997. The Structure of Applied General Equilibrium Models, Cambridge MA: MIT Press.
  • Wing, Ian Sue. 2003. Computable General Equilibrium Models and Their Use in Economy-Wide Policy Analysis: Everything You Ever Wanted to Know (But Were afraid to Ask).

Session 3: IMPLEMENTATION

  • Database, SAM, NIPA, IO
  • Calibration
  • Solution strategy
  • GAMS software

SLIDE PRESENTATION (3)

Readings:

  • Robinson, S., A. Yúnez-Naude., R., Hinojosa-Ojeda., J. D. Lewis, and S. Devarajan. 1999. From Stylized to Applied Models: Building Multisector CGE Models for Policy. North American Journal of Economics and Finance. 10: 5-38.

Optional Reading:

  • Brooke, Anthony, David Kendrick, and Alexander Meeraus. GAMS: A User's Guide (Release 2.25). Redwood City, California: Scientific Press, 1992.
  • Lofgren, Hans. 2003a. Exercises in General Equilibrium Modeling Using GAMS. IFPRI.
  • Lofgren, Hans. 2003b. Key to Exercises in General Equilibrium Modeling Using GAMS. IFPRI.
  • McCarl, Bruce A. 2000. Using GAMSIDE.
  • Rosenthal, Richard E. A GAMS Tutorial.
  • The link www.gams.com/download will provide free access to the GAMS software needed to complete the above exercises.
  • The link http://www.gams.com/docs/contributed/index.htm contributed by people working with GAMS.

Session 4: EXTENSIONS-APPLICATIONS

  • Extension
    • Dynamics
    • Uncertainty
    • Financial CGEs
  • Application
    • Development Policy Analysis
    • International Trade
    • Energy-Environment
    • Natural Resources
    • Urban/Regional Analysis

SLIDE PRESENTATION (4)

Optional Reading:

  • Bergman, Lars. 1988. Energy Policy Modeling: A Survey of General Equilibrium Approaches. Journal of Policy Modeling, 10:3, pp. 377-99.
  • Bhattacharyya, Subhes C. 1996. Applied General Equilibrium Models for Energy Studies: A Survey. Energy Economics, 18, pp. 145-64.
  • Dervis, K, J. de Melo, and S. Robinson. 1982. General Equilibrium Models for Development Policy. Cambridge: Cambridge University Press.
  • Devarajan, S. 1988. Natural Resources and Taxation in Computable General Equilibrium Models of Developing Countries. Journal of Policy Modeling, 10 4, pp. 505-28.
  • Devarajan, S. 1997. Can Computable General Equilibrium Models Shed Light on the Environmental Problems of Developing Countries? in P. Dasgupta and K.G. Mahler, eds., The Environment and Emerging Development Issues, Cambridge: Cambridge University Press.
  • Partridge, Mark D., and Dan S. Rickman. 1998. Regional Computable General Equilibrium Modeling: A Survey and Critical Appraisal. International Regional Science Review, 21:3, pp. 205-48.
  • Vargas, Eliecer, Dean Schreiner, Gelson Tembo and David Marcouiller. 1999. Computable General Equilibrium Modeling for Regional Analysis , in S. Loveridge, ed., Web Book of Regional Science , Morgantown, WV: Regional Research Institute, West Virginia University.