Macroeconomic structure and computable general equilibrium models

Abstract Economy-wide analysis can be undertaken within three different accounting frameworks: (1) the national income and product accounts, which focus on balance among macroaggregates; (2) the input-output accounts, which focus on intermediate flows and on the sectoral composition of production and demand; and (3) the social accounting matrix (SAM), which provides a framework incorporating both national income and product as well as input-output information. All three of these frameworks have been used to develop fixed coefficient, linear multiplier models. Keynesian multipliers at the macro level have multisectoral counterparts in the input-output model and “multi-institutional” counterparts in SAM-based models. These linear multiplier models tend to be completely demand driven and do not incorporate supply constrains or substitution possibilities. Computable general equilibrium (CGE) models have been developed which capture nonlinear substitution possibilities and multisectoral supply-demand interactions, and also incorporate macro variables and mechanisms for achieving balance among aggregates. “Marginal” multipliers can be derived for CGL models using the Jacobian matrix of partial derivatives at a given equilibrium. This paper develops an approach to analyzing Jacobian multipliers from a CGE model that decomposes macro, sectoral, and institutional linkages in a SAM framework. We give an illustration of SAM-multiplier decomposition using a small CGE model of the United States.