1 The Structure of the Moffat Scenario CGE Model Adam Blake 2004/6 Abstract This paper describes the computable general equilibrium (CGE) model used in the VisitScotland Moffat Scenario Model. 1 The Modelling Framework The model structure is a single-country static CGE model. The single defining factor of any CGE model is that of simultaneous market clearing; a number of product and factor markets are identified and modelled, and prices adjust in each market to ensure that demand equals supply. This means that interactions between markets lead to the need for simultaneous solution of the entire economic system, which is typically performed by specialist software. The models under consideration here are all solved using the Mathematical Programming System for General Equilibrium (MPSGE; (Rutherford 1994), which is solved within the programming system GAMS (General Algebraic Modelling System; Brooke et al. 1998). Figure 1 shows the circular flow of income in an economy. Income flows clockwise around the four main parts of the economy in this diagram, from industries to factor markets to institutions to commodity markets and back to industries. Apart from this main flow of income, there are other flows from industries to commodity markets (intermediate demand), tax payments from industries (taxes on production) and commodity markets (taxes on products) to one of the institutions, government. The rest of the world receives income from the economy’s imports; the economy’s commodity markets receive income from exports, and institutions pay and receive income from the rest of the world through foreign savings and transfers, which include payments for factor services owned abroad and for domestic factor payments that are transferred abroad. There are flows of income between and within institutions that are not shown in the figure, such as income taxation from households to government, transfers from the government to households and between-household transfers.