Modelling the Common Agricultural Policy. General equilibrium effects of the 2014-2020 budget agreement

This paper presents methodological development of MAGNET, a sophisticated agricultural variant of the well-known GTAP computable general equilibrium (CGE) model for representing the Common Agricultural Policy (CAP). Using original data on EU domestic support, it examines some likely macroeconomic effects in the European Union (EU) of the expected budget over the period 2014-2020. Results suggest that agreed budget cuts, in constant price, have limited impacts on EU and world markets, given the broadly non-distortive representation of present CAP policy.