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VALIDATING POLICY INDUCED ECONOMIC CHANGE USING SEQUENTIAL GENERAL EQUILIBRIUM SAMs

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  • M. Alejandro Cardenete
  • M. Carmen Lima

    ()

  • Ferran Sancho

    ()

Abstract

This paper explores the capacity of computable general equilibrium (CGE) models to track down policy induced economic changes and their ability to generate contrastable data for an economy. Starting from an empirically built regional Social Accounting Matrix (SAM), a first stage CGE calibrated model is constructed. The model is then perturbed with a set of policy shocks related to European Union Structural Funds 2000-2005 invested into the region of Andalusia in the south of Spain. The counterfactual equilibrium is translated into a virtual SAM, conformal with the initial one, which is in turn reused to calibrate the next stage in the CGE modeling. And so on until the last stage is reached and all European funds yearly invested have been absorbed by the economy. Since at the end of the process another empirical SAM is available, it can be compared with the terminally produced virtual SAM. The comparison shows the sequence of SAMs to provide a very good fit to the actual data in the empirical SAM. Regional GDP and unemployment rates are two examples of the close approximation. With this novel approach we evaluate, from the methodological viewpoint, the projection capabilities of CGE modeling and at the same time we provide an empirical assessment of the said European policies.

Suggested Citation

  • M. Alejandro Cardenete & M. Carmen Lima & Ferran Sancho, 2012. "VALIDATING POLICY INDUCED ECONOMIC CHANGE USING SEQUENTIAL GENERAL EQUILIBRIUM SAMs," UFAE and IAE Working Papers 893.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  • Handle: RePEc:aub:autbar:893.12
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    References listed on IDEAS

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    1. Timothy J. Kehoe, 2003. "An evaluation of the performance of applied general equilibrium models of the impact of NAFTA," Staff Report 320, Federal Reserve Bank of Minneapolis.
    2. Ezequiel Uriel Jiménez & Javier Ferri & María Luisa Moltó Carbonell, 2005. "Matriz De Contabilidad Social De 1995 Para España (Mcs-95)," Working Papers. Serie EC 2005-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    3. Mark Partridge & Dan Rickman, 2010. "Computable General Equilibrium (CGE) Modelling for Regional Economic Development Analysis," Regional Studies, Taylor & Francis Journals, vol. 44(10), pages 1311-1328.
    4. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521266550.
    5. Melchor Fernández & Clemente Polo, 2000. "Una nueva matriz de contabilidad social para España: la SAM-90," Documentos de trabajo - Analise Economica 0011, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    6. Kehoe, Timothy J. & Whalley, John, 1985. "Uniqueness of equilibrium in large-scale numerical general equilibrium models," Journal of Public Economics, Elsevier, vol. 28(2), pages 247-254, November.
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    More about this item

    Keywords

    Social accounting matrices; applied general equilibrium; impact analysis; European regional policy.;

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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