An iterative method for solving CGE models
26 October 2023
This paper by Xiao-guang Zhao was presented to the 2022 National CGE Workshop at the Victoria University in Melbourne.
This paper presents a solution method for computable general equilibrium (CGE) models, an alternative to the conventional methods based on matrix inversion and mathematical solvers. This method uses iterative price adjustments to equate supplies and demands in markets.
The paper explains how such an iterative search method works and how it can be applied to solving CGE models. It concludes with a summary of the key steps required for this procedure and a discussion of the benefits of using this method for CGE models.
The views expressed in this paper are those of the staff involved and do not necessarily reflect the views of the Productivity Commission.