CGE models fit economic data to a set of equations which aim to capture the structure of the economy and behavioural response of agents (firms, households, government). This provides a framework to simulate policy changes and trace the impact on key economic variables, including income and expenditure flows.
Computable General Equilibrium (CGE) models are large systems of non-linear equations that combine economic theory with real economic data to describe impacts of policies or shocks in the economy.