Abstract
This paper develops a general equilibrium model for the Republic of Croatia to evaluate CGE model use in macroeconomic management and forecasting. Since Croatia is a small open country subject to large external shock and growth constraints efficient macroeconomic management framework is fundamental. The lack of data prevents to follow historic economic variables over a longer period of time, which is why CGE models look as possible solution. CGE models use calibration to solve the problem of missing most macroeconomic variables. After developing the model, we use it to run different scenarios for economic policies using a CGE model for Croatia. Results show that CGE model can be an important instrument for policy makers in running macroeconomic policies for small open countries.
Highlights
How important are General Equilibrium Models for small open economies? General Equilibrium Model (GEM) represents a combination of the basic postulates of the theory of general equilibrium with data from the economy of a country
This paper develops a general equilibrium model for the Republic of Croatia to evaluate Computable general equilibrium” (CGE) model use in macroeconomic management and forecasting
Macroeconomic management in Croatia lacks in clear development strategy and decisions in economic policy are not based on any macroeconomic model
Summary
How important are General Equilibrium Models for small open economies? General Equilibrium Model (GEM) represents a combination of the basic postulates of the theory of general equilibrium with data from the economy of a country. How important are General Equilibrium Models for small open economies? Model includes data related to supply and demand, prices, and overall balance in different markets. Using general equilibrium models for the study of small open economies and the importance of these results is this paper key question. CGE models are widely used in small open economies of developing countries. CGE models simulate the interaction between different economic entities on the overall market. Structure of the CGE model requires a description of the overall supply and demand in the market. CGE models are commonly used in small open economies of developing countries and are most suitable for countries like Croatia. Macroeconomic management in Croatia lacks in clear development strategy and decisions in economic policy are not based on any macroeconomic model. Our work is based on a model for countries of similar size and position as Croatia
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
