Computable General Equilibrium Model

MOTIVATION

To estimate how Ethiopia’s economy might react to certain policy changes, IFPRI and its partners developed, in 2005, the Ethiopian computable general equilibrium (CGE) model, a multimarket model that incorporates agriculture and 256 unique sub-sectors.

OUTCOMES

The Ethiopian CGE model developed by IFPRI has been used in combination with a regionally disaggregated social accounting matrix (that is, a representation of the flow of all economic transactions in the economy)

  • to quantify the implications for national economic growth and poverty reduction if the agricultural growth and public investment targets set by CAADP  and agreed to by Ethiopia were achieved;
  • to explore the causes and the ramifications of alternative strategies for reducing food price inflation;
  • to assess the growth and distributional effects of the government’s foreign exchange rationing (this assessment was, according to some accounts, instrumental in debates leading up to the 2010 devaluation of the Ethiopian birr); and
  • to examine the potential impacts of global climate change on Ethiopia.

Developing and using the Ethiopian CGE model involved important interactions among IFPRI; the EDRI; Ethiopian researchers; and staff, students, and faculty at Addis Ababa University. Training activities made a distinct contribution to human capital formation and the building of research capacity in Ethiopia.