The computable general equilibrium (CGE) model contains detailed information on sectors and goods, taking account of the input-output relationships between various sectors of the economy.
Latvijas Banka uses the CGE model for analysing the direct and indirect effects of various macroeconomic developments and fiscal policy changes on the overall economy and selected sectors on a regular basis.
The current version of the model comprises 63 sectors and 63 goods using data from input-output as well as supply and demand tables for 2015. The number of equations in this model is close to 30 thousand.
While developing Latvia's CGE model, special attention was paid to the fiscal block: the model consists of the major government expenditure types and five revenue sources, including four major taxes such as the personal income tax, mandatory social security contributions, value added tax and excise tax.
Latvijas Banka has merged the EUROMOD and CGE models into a single CGE-EUROMOD model, which is used to analyse the impact of macroeconomic changes on income of various social groups as well as to assess the indirect effect of changes in taxes and benefits.
For further information about the computable general equilibrium (CGE) model
- Beņkovskis, K., Matvejevs, O. (2023). The New Version of Latvian CGE Model, Working Papers, 2/2023, Latvijas Banka
- Goluzins, E., Beņkovskis, K., Tkačevs O. (2016). CGE model with fiscal sector for Latvia: Working Papers, 1/2016, Latvijas Banka
Examples of CGE model usage
- Beņkovskis, K., Fadejeva, L., Pluta, A., Zasova, A. (2023). Keeping the best of two worlds: Linking CGE and microsimulation models for policy analysis, Working Papers, 1/2023, Latvijas Banka
- The impact of a further drop in wood prices on Latvia's economy. Macroeconomic Developments Report, Section 7.2, December, 2019, Latvijas Banka
- Zutis, K., Vilerts, K., Fadejeva, L. (2019). Three recipes to increase tax revenue, Makroekonomika.lv, available only in Latvian
- Assessment of tax reform proposals, Makroekonomika.lv, 2017, available only in Latvian
- Tax strategy 20/20. makroekonomika.lv, 2017, available only in Latvian
- Russia's cargo traffic diverted from Latvian ports. Macroeconomic Developments Report , Section 8.2, December, 2016, Latvijas Banka, available only in Latvian