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

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 (1(st) pillar) is more harmful for the economy than the removal of investment subsidies (2(nd) 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.