Regional Financial CGE Model for Infrastructure Investment Policy

Abstract

In this paper, regional financial computable general equilibrium (RFCGE) model was developed. The RFCGE model is a useful tool in the evaluation of regional fiscal policies. So far, computable general equilibrium (CGE) models have often been used to evaluate regional infrastructure investment policies. However, conventional CGE models do not consider financial assets, such as deposits, equities, and government bonds and decision-making mechanism of government. Therefore, applying CGE models might overestimate the benefit incidence of policies on the rural society. To confirm this theory, the RFCGE model was applied to regional infrastructure investment policy.