A CGE MODEL FOR MALAWI: TECHNICAL DOCUMENTATION

Computable General Equilibrium (CGE) models are a class of economywide models that are widely used for policy analysis in developing countries. This paper provides a detailed documentation of an applied CGE model of Malawi – the first ever for Malawi – developed in the context of the project “Collaborative Research and Capacity Strengthening for Multi-Sector Policy Analysis in Malawi and Southern Africa.” The purpose of this paper is to serve as a source of background information for analysts using the model in the context of the current project and in the future. The model is built around a 1998 Social Accounting Matrix (SAM) for Malawi, which was developed in the context of the current project, is based on data from the 1998 Integrated Household Survey of Malawi. The main parts of the paper are a brief, self-contained summary of the model, and a detailed mathematical model statement, presented in a step-by-step fashion. The Appendices present a mathematical model statement in summary form and the 1998 Malawi SAM. The applied Malawi model can be used for analyses in a relatively wide range of areas, including agricultural, trade, and tax and subsidy policies. It is characterized by a detailed treatment of the labor market and households, permitting model simulations to generate information about the disaggregated impact of policies on household welfare. As part of the project research activities, the model is used to analyze the impact of external shocks and domestic policies aimed at poverty alleviation. This analysis is presented in a separate document.