Using a social accounting matrix to generate a computable general equilibrium model: the case of Uganda

Abstract

CGE models were first applied to developing countries in the early 1970s. Work has since then expanded considerably. These models are based on the socio-economic structure of a SAM, with its multi-sectoral and multi-class desegregations put to consideration. Other than being close to multi-market models, in which agents’ decisions are price responsive, CGE models also encompass macro-economic components such as investment, savings, Balance of Payments and the government budget. In this paper, I use the SAM of the Ugandan economy 2002, which was developed recently, to calibrate a simple CGE model. The idea is basically to construct artificial sectors - i.e. households, enterprises, government & the foreign sector – which make the same transactions in the equilibrium model of the economy as do their counterparts in the data. The model is basically calibrated to the SAM. The usefulness of the model is shown by presenting results of simulations that consider the policy changes that may be implemented in the tax system of Uganda.