A Minimalist CGE Model for Analysing Trade Liberalisation in South Africa

Abstract

CGE models are increasingly being used to inform economic policy analyses in South Africa. This paper is an attempt to improve the accessibility of the approach by providing a minimalist CGE model for the South African economy. The strengths and weaknesses of this minimalist CGE are determined by using it to simulate South Africa’s tariff reform programme. The results are consistent with theoretical and empirical research on trade liberalisation, and the model provides justification for these aspects in the government’s recently announced macroeconomic strategy. The weaknesses of the minimalist model are such however, that the need for a large-scale multisectoral model remains. The primary use of the minimalist CGE model lies in its suitability as a pedagogical tool. For this purpose, the spreadsheet version of the model is available from the authors.