CGE stands for Computable General Equilibrium model. It is an economic tool used to analyze the effects of various policy changes and shocks on the economy.
A CGE model is a type of mathematical model based on economic theory that seeks to represent the entire economy and its interactions between different sectors and agents. It takes into account various economic variables such as prices, production, consumption, investment, trade, and factor income. These variables are represented by equations that capture the relationships between different parts of the economy.
The CGE model is characterized by its ability to capture the complex interdependencies and feedback effects within an economy. It considers the interactions between different sectors, households, firms, and the government, and provides a comprehensive analysis of how changes in one part of the economy can ripple through to other parts.
The model is useful for policymakers and economists to understand the potential impacts of different policy interventions, such as changes in taxes, government spending, trade policies, or technological advancements. It enables them to assess the distributional effects, welfare impacts, and overall economic performance resulting from these policy changes.
Overall, a CGE model provides a useful tool for economic analysis and policy evaluation, by allowing economists to simulate and quantify the effects of different variables and policies on the economy as a whole.
