General equilibrium modelling in South Africa : an overview and appraisal / by Riaan Rossouw

Since the 1990s, there has been a considerable increase in the use ofcomputable general equilibrium (CGE) models in South Africa to study avariety of policy issues, specifically, development plans, agriculturalprogrammes, tax policy and international trade. This study asks: What isthe state of computable general equilibrium modelling in South Africaafter more t h a n a decade of growth and development and what is theway forward?Answering the above questions is both relevant and significant for tworeasons. The first is that such an appraisal can help pave the wayforward for general equilibrium modelling in general. The advantages ofCGE models for policy analyses, compared to traditional macroeconomicmodels, are now widely acknowledged. General equilibrium models allowfor consistent comparative analysis of policy scenarios and theyincorporate microeconomic mechanisms and institutional features withina consistent macroeconomic framework, and avoid the representation ofbehaviour in reduced form. This allows analysis of structural changeunder a variety of assumptions.The second reason pertains specifically to policy challenges facing SouthAfrica and the modelling thereof. The CGE models of the 1990s wereused to examine the issues of the day such as macro stability and theopening up of the economy. An appraisal of the models will indicatetheir usefulness in policy formulation then and now. Currently thechallenges have shifted to the labour market, environmental questionsand sub-national issues and a timely overview may help to indicate theway forward for CGE modellers.