Macroeconomic Consequences of a Common Agricultural Policy Budget Reduction for the Czech Economy – a General Equilibrium Approach
Macroeconomic Consequences of a Common Agricultural Policy Budget Reduction for the Czech Economy – a General Equilibrium Approach

Summary/Abstract: The objective of this paper is to quantify the impact of selected scenarios of a Common Agricultural Policy (CAP) budget reduction on the macroeconomic equilibrium of the Czech economy with the use of a dynamic general equilibrium model. The findings show that in the short term, a reduction in direct payments (1st pillar) is more harmful for the economy than the removal of investment subsidies (2nd pillar); this is completely reversed in the long term, in which the removal of investment subsidies leads to a considerably stronger decline in economic growth.

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