Global CGE models validated: Unlocking accurate policy forecasts for a changing world
Market models called CGE frameworks are used to predict opportunities and threats in policy-making. A new method was developed to test how well these models predict global economic trends. By analyzing historical data, researchers found that CGE models are better at predicting sectoral output trends than simply extrapolating past data. However, errors still exist, especially in rapidly growing small economies. These errors are mainly due to specific factors in each sector, rather than characteristics of individual countries. This research suggests that improving how productivity is modeled in CGE frameworks could lead to more accurate predictions in the future.