CGE

Introduction to Building CGE Models in GAMS

These notes were developed for a short course introducing concepts and techniques of CGE modeling that I have taught at various locations around the world. I would like to thank students and participants at Utah State University (USA), University of Auckland (New Zealand), Chulalongkorn University (Thailand), University of the South Pacific (Fiji), Hitotsubashi University (Japan), University of Zagreb (Croatia), National University of Mongolia (Mongolia), University of Economics in Bratislava (Slovakia), and at numerous workshops organized by the United Nations ESCAP for helping to improve the content over the last few years. I would also like to thank Edward Tower, my co-author of the book on which the course is based, who has also taught similar courses at various locations including Duke University (USA) and Nanyang University of Technology (Singapore), and who first introduced me to CGE. The course covers basic CGE models for policy analysis, and how they can be built using the General Algebraic Modelling System (GAMS). Computable general equilibrium (CGE) is a technique that is widely used for simulating the effect of changes in economic policy on economies at the system level. The course provides a hands-on introduction to building and using CGE models. Through a sequence of programs, the course illustrates how CGE models are built, and how numerical simulations with them can be designed to analyze a wide array of problems. Modern computable general equilibrium (CGE) models are challenging in their complexity, but can be thought of as constructions of much simpler building blocks. By developing the building blocks in a consistent manner, and gradually putting them together in more complex and interesting ways, the course makes CGE accessible to anyone with a basic background in microeconomics.

Requirements:

This is a graduate level class, but if you are comfortable with intermediate microeconomic theory you should be fine. Having courses in trade theory will help too. I don't assume you know anything about GAMS, programming, or CGE, but if you have some familiarity with those topics it will be helpful.

Resources:

The notes are based on the text: Gilbert, J. and E. Tower (2013) Introduction to Numerical Simulation for Trade Theory and Policy (World Scientific).

You can download a working paper which contains the early drafts of the first 12 chapters from RePEc.

You can also download working versions of many of the models we will develop (and more) from RePEc, but I don't want you to do this until you have worked out the programming yourself.

The latest demonstration version of GAMS (which is sufficient to run all of the models we will build) can be obtained directly from the GAMS website.

Excel example of a CGE model.

Workshop I:

Topic 01: Brief Introduction to CGE

Topic 02: GAMS Primer

Topic 03: Demand

Topic 04: Firms

Topic 05: Supply

Topic 06: Trade

Topic 07: Tariffs and Other Interventions

Topic 08: The Armington Assumption

Topic 09: More on Production

Topic 10: Closure

Topic 11: Social Accounting Matrices

Topic 12: The 'Standard' CGE Model

Topic 13: Next Steps

Workshop II:

Topic 00: Outline

Topic 01: Base Model -- GAMS Code

Topic 02: Improving the Demand System -- GAMS Code

Topic 03: Adding Armington Preferences -- GAMS Code

Topic 04: Adding Joint Production -- GAMS Code

Topic 05: Adding Market Power at the Country Level -- GAMS Code

Topic 06: Adding Intermediate Goods -- GAMS Code

Topic 07: Accounting for Public Expenditure and Investment -- GAMS Code

Topic 08: Social Accounting Matrices Review -- GAMS Code -- Mongolia SAM

Topic 09: CGE Model of Mongolia -- GAMS Code

Topic 10: Non-Tariff Measures

Topic 11: Multilevel Armington