On approximating the accelerator part in dynamic input–output models
We release the limitations of previous studies and instead of setting the crucial parameters of the dynamic endogenous input–output model with layers of techniques on an arbitrary basis we propose a new optimization-based approach to approximating of the elements of capital matrices on the basis of recent historical data. Using recent IO data we first formally prove that in comparison to arbitrarily adjusted dynamic IO models the new theoretical approach allows one to obtain a significantly better fit to the historical data in the short-run. This result has also some implications for the long-run analyses as it suggests that using the new approach for typical empirical applications of dynamic IO models with respect to modelling future behavior of economies seems relatively much more reasonable. Having this remark in mind, in the empirical part of the paper we use the new methodological approach in a particular case study. In an illustrative empirical application we try to forecast the possible evolution of sectoral classification in the Polish economy over the next 40 years.
KeywordsDynamic input–output model Nonlinear optimization Key sector analysis
JEL ClassificationC53 D57 030
We would like to thank the Editor of this journal, prof. Ulrike Leopold-Wildburger, and two anonymous Referees for valuable comments on earlier versions of the paper. Financial support for this paper from the National Science Centre of Poland (Research Grant No. DEC-2015/19/B/HS4/00088) is gratefully acknowledged.
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