Coefficient stability and predictability in input‐output models: a comparative analysis for the Netherlands

Abstract

Following the work of Bon, this article compares the stability of two types of input‐output models. These are, the Leontief (or demand‐driven) model and the Ghosh (or supply‐driven) model. The empirical results are based on a times series of annual input‐output tables for the Netherlands, covering the period 1948–84. Three types of analysis are carried out. The first to evaluate the stability of the models' underlying coefficients over time. The second to investigate the forecasting behaviour when there is perfect foresight with respect to the models' exogenous variables. The third to examine the predictability of the models, absent of perfect foresight.

Keywords:

• Stability
• forecasting behaviour
• input‐output models

Acknowledgement

The authors would like to thank the three anonymous referees of this journal for their useful comments and suggestions.

Notes

1. See also Bon (2001), which is a slightly revised version of Bon (1997).

2. Throughout this article, bold capital letters are used for matrices, bold lower‐case letters for vectors and italic lower‐case letters for scalars. Vectors are columns by definition and row vectors are obtained by transposition, indicated by a prime.

3. See Centraal Bureau voor de Statistiek (various years).