The phantom of the matrix: Inverting the case on closure in Cole's model

Abstract

In Closing the Case on Closure in Cole's Model Randall Jackson and Moss Madden critique my solution to the time-lagged regional input-output model. My rebuttal demonstrates that they: i) interpret my model incorrectly, ii) are inconsistent in their own specification, and iii) make inapplicable numerical comparisons between short- and long-term solutions. I show also iv) the correct solution to the totally closed model is neither trivial, nor singular, and v) this resolves the apparent paradox of infinite multipliers in a finite world. Moreover, vi) in my model, injecting exogenous demands equal to export earnings correctly reproduces the base output levels. The standard model does not meet this test.