A Quantitative General Equilibrium Model of the Swedish Economy

Bergman, L. & Por, A. (1980). A Quantitative General Equilibrium Model of the Swedish Economy. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-80-004

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Abstract

A quantitative general equilibrium model is a useful tool primarily for two types of studies. One type is studies with a time horizon two or more decades into the future. In such studies, a model of this type can highlight various features of future economic conditions by delineating a number of resource allocations, each consistent with full equilibrium on product and factor markets. A second field of application is comparisons between actually observed resource allocations and hypothetical equilibrium allocations.

In this report a quantitative general equilibrium model of an open economy is developed and applied on Swedish data. In addition to the foreign trade flows, the model emphasizes the energy flows in the economy. The model is solved in a two-step procedure which is reiterated until a full equilibrium is reached. In the first step, technological coefficients and output prices are determined on the basis of initial values on factor prices. Then the excess demands on factor markets at product market equilibrium are determined. After that the initial factor prices are adjusted and the process repeated.

The report also contains some preliminary results, as well as a brief discussion of future directions of research in this field.

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