While chapter four has looked at partial equilibrium models, this chapter focuses on the second
family of simulation models, the so-called general equilibrium (GE) models. GE models will be
preferred to partial equilibrium models when the scope of the experiment is large, when intermarket linkages (impact on factor rewards), budget constraints and real exchange rate effects are expected to be particularly important.
The aim of this chapter is to provide the reader with an understanding of how CGE models work, what they can and cannot do, and what is required to run a CGE simulation.
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