Forecasts of Input-Output Matrices Using the R.A.S. Method

Abstract

It is now widely accepted that predictions of such key quantities as imports, final demands, gross domestic output and employment depend crucially on a knowledge of the technology of an economy, and in particular of the input coefficients of the technology matrix. However, many investigations have pointed out that these coefficients change over time owing to alterations in the product mix at a sectoral level, changes in production techniques, relative price changes and economies of scale. Some econometric analysts have concentrated on relative price effects (Theil and Tilanus, 1964), and very few studies have considered the impact of product mix changes or economies of scale. Any analysis of the intertemporal behaviour of input-output coefficients requires a great deal of data, both on a time-series basis and with a uniform classification scheme. Such data are obviously very scarce, and as a consequence the attention of forecasters has shifted towards the incorporation of specialist technical information into the estimation of future coefficients. In common with earlier studies, this paper concentrates on the R.A.S. method of forecasting and examines an updating of the 1959 absorption flow matrices of nine European countries to the 1965 level of technology. The updated matrices, along with various derived quantities, are compared with the corresponding figures based on the actual 1965 tables at a 19-sector level of disaggregation. The data are prepared in a standardized framework by the Economic Commission for Europe (ECE) (1971) for twelve European countries for the year around 1959 and by the ECE data tape (1977) for nine European countries. The purpose of the ECE research programme was to make structural comparisons between various European countries. Data are obviously reduced from national tables to standardized tables following a homogeneous 19-sector scheme.