FINAL DEMAND CONVERSION COEFFICIENTS FOR THE 1972 UNITED STATES INPUT-OUTPUT TABLE AND THEIR USE IN MICROECONOMIC MODELLING

Abstract

Business economists often need to translate the fairly broad results of macroeconomic models to the level of specific commodities. A 496–sector input-output table provides much useful disaggregation but it is not readily integrated into a macro model. A solution to this problem is offered in this paper. Described is a procedure which uses input-output analysis, matrix algebra, and statistical regression analysis to link the 1972 input-output table of the United States economy with a conventional macroeconomic model. The major result is a single 496x15 matrix which gives the direct and indirect output, of each of 496 commodities, generated per dollar of each of fifteen final demands. An example is given to demonstrate how the matrix can be used, along with a time series regression technique, to develop a model for forecasting a commodity's production. A model developed in this way can be used as a simulator to measure the direct and indirect effects of several possible economic and public policy decisions on the level of a commodity's total output.