CoPS/IMPACT Working Paper Number G-197

Title: Forecasting with a CGE model: does it work?

Authors: Peter B. Dixon and Maureen T. Rimmer


Computable general equilibrium models can be used to generate detailed forecasts of output growth for commodities/industries. The main objective is to provide realistic baselines from which to calculate the effects of policy changes. In this paper, we assess a CGE forecasting method that has been applied in policy analyses in the U.S. and Australia. Using data available up to 1998, we apply the method with the USAGE model to generate "genuine forecasts" for 500 U.S. commodities/industries for the period 1998 to 2005. We then compare these forecasts with actual outcomes and with alternate forecasts derived as extrapolated trends from 1992 to 1998.

JEL classification: C68, E37, F14

Keywords: CGE validation; Forecasting; U.S. CGE

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