A Financial Computable General Equilibrium Model for the Analysis of Ecuador's Stabilization Programs

This paper presents an application to Ecuador of a computable general equilibrium model with a financial component, following the lead of F. Bourguignon, W. Branson and J. de Melo. Their macro-micro model was introduced in Technical Paper No.1 "Macroeconomic Adjustment and Income Distribution. A Macro-micro Simulation Model". The authors first review the crisis of the Ecuadorian economy, the stabilization programmes that were implemented by governments and the economic effects of these programmes. Then the model and the corresponding data base are presented and used to perform three dynamic simulations. In the first case, there is no adjustment; in the second simulation, all public expenditures are reduced by the same percentage; and in the third simulation, the annual growth in money supply is reduced. For each simulation, the authors display the effects on growth, imbalances and income distribution. Finally a sensitivity analysis has been undertaken in order to assess the impact ...