Exploring macroeconomic models in the water, energy, food, and ecosystem (WEFE) field: a comprehensive review

Abstract

This study conducts a comprehensive review of macroeconomic models within the Water, Energy, Food, and Ecosystem (WEFE) nexus, considering four different approaches: computable general equilibrium (CGE) models, integrated assessment models (IAMs), agent-based models (ABMs), and dynamic stochastic general equilibrium (DSGE) models. Specifically, we examine how macroeconomic models represent not only the WEFE nexus as a whole but also its individual components and their combinations. Spanning a collection of 77 papers published in the last 20 years, this review underscores the prevalence of CGE models and IAMs, followed by ABMs, as dominant avenues of research within this field. CGE models frequently investigate interconnections between pairs of WEFE elements, while IAMs focus on the whole nexus. At the same time, ABMs do not exhibit a clear pattern, whereas DSGE models predominantly concentrate on the energy component alone. Overall, our findings indicate that the development of DSGE models and ABMs is still in its early stages. DSGE models potentially allow the analysis of uncertainty and risk in this field, while ABMs might offer new insights into the complex interactions between natural and human systems but still lack a common framework.