Computable General Equilibrium Model for Georgia
Status: Complated
Project Milestones: Start date: 03.12.2012 End Date: 27.02.2015

The Computable General Equilibrium (CGE) model is an analytical tool commonly used by countries and international financial institutions to simulate policy interventions. CGE applications are not limited to any particular policy area. Their usefulness is highest when the simulated policy intervention is expected to generate significant feedback effects or spillovers into sectors that may not be directly affected. Common policy applications include large-scale public infrastructure projects, fiscal policy, trade policy, social policy, regional policy, education, and healthcare reforms. 

Implemented with the support of the University of Warwick's Institute for Employment Research, this project included a capacity-building phase for ISET-PI researchers and a follow-up phase to construct a Computable General Equilibrium (CGE) model for Georgia. The modeling phase started in December 2012, with four teams of junior researchers focusing on four different policy priorities: optimal exchange rate policy, the impact of DCFTA with the EU combined with support measures for the negatively affected sectors, export promotion, and social security reform. Analysis based on these models was presented to the National Bank of Georgia, the Ministries of Economy and Sustainable Development, and of Finance. Later in 2014, ISET-PI was contracted by the GIZ to use the 2013 data for updating the Social Accounting Matrix (SAM) for Georgia. Used for Computable General Equilibrium analysis of the impact of policies on regional disparities, rural-urban inequality, unemployment, GDP, SAMs are based on Supply-Use tables, national accounts, government budget, the balance of payments, and integrated household survey data. Three different SAMs, at different levels of disaggregation, have been produced as part of this project.