In this chapter, we examine the supply side of an economy as represented in computable general equilibrium (CGE) models. The production data in the social accounting matrix (SAM) depict the production process, in which firms combine intermediate inputs with factors of production to produce goods and services. We use these data to calculate input-output coefficients, which describe the input intensity of production processes. CGE models break down the production technology into parts, depicting how subprocesses are nested within the overall production process. Within each nest, behavioral equations describe producers’ efficiency-maximizing input demands and output levels, subject to their production technology. Export transformation functions, used in some CGE models, describe the allocation of production between domestic and export markets.We also examine the supply and demand structure of a CGE model with a non-diagonal make matrix and a technical appendix examines a case of energy nesting.

In this chapter, we describe final demand by domestic agents – private households, government, and investors – and by the export market. Data in the Social Accounting Matrix (SAM) describe agents’ incomes and the commodity composition of their spending. The computable general equilibrium (CGE) model depicts demand by domestic agents as a three-stage decision. First, consumers decide on the quantities of each commodity in their consumption basket. Second, an “Armington” import aggregation function describes their choice between domestic and imported varieties of each commodity. In some CGE models, a third stage describes the sourcing of imports. We survey functional forms commonly used in CGE models to describe private household preferences. We also introduce the concept of “national welfare,” which is the monetary value of changes in a nation’s well-being following an economic shock.

This chapter introduces students to computable general equilibrium (CGE) models, a class of economic model that describes an economy as a whole and the interactions among its parts. The basic structure of a CGE model and its database are described. We introduce a “standard” CGE model and provide a survey of CGE model applications.

This chapter offers a conclusion to our study of CGE models and provides a survey frontier areas in CGE modeling that explains how these innovations extend a standard CGE model.

The objective of these 11 model exercises is to provide you with step-by-step guidance in downloading a CGE model, exploring its structure and behavior,, designing experiments, identifying relevant results, and interpreting findings.

In this chapter, we deconstruct the computable general equilibrium model and describe its core elements. These include sets, endogenous and exogenous variables, exogenous parameters, behavioral and identity equations, and model closure. We describe composite commodities and prices, price relationshipds, price normalization, price transmission, and the numeraire. We explain how the CGE model runs and how to carry out an experiment.

This book will introduce you to computable general equilibrium (CGE) models. A CGE model is a powerful analytical tool that can help you gain a better understanding of real-world economic issues. Computable general equilibrium models are a class of economic model that over the past three decades has gained widespread use in the economics profession, particularly in government. Economists today are using these models to systematically analyze some of the most important policy challenges and economic “shocks” of the twenty-first century, including global climate change, trade agreements, the spread of human diseases, and international labor migration.