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Thinking Inside the Box: Input−Output
Thu, Jul 10 2008, 09:24 GMT
by Yapi Kredi Bank Economic Research Department
Anyone who has an interest on the real side of Turkish economy might have encountered the famous sketch of industrial production and exports rising together from 2002 and onwards. The common interpretation of this relationship is that the manufacturing sector is becoming more outward-looking and exports are the main driver behind industrial growth.
Most of the time, no comment is made about imports and are omitted from the analysis, as if everyone has come to an agreement on the fact that an increase in industrial production will inevitably lead to an increase in imports. This is a strong argument since about two out of three dollars of import bill come from intermediate goods.
Very few studies have been conducted to identify and decompose the relationship between production, exports and imports at sector level mainly due to data limitations. Quantitative evidence on the structural link between industrial production and foreign trade for each sector would be a substantial policy (and simulation) tool for decision makers and analysts.
This study’s main objective is to calculate the backward linkages and import dependencies of industrial sectors before and after the crisis in 2001. Input-output tables are used for this purpose due to their usefulness as a “snapshot” of the whole economy. The compilation of IO tables is extremely difficult, since data requirements are enormous. Two recent tables are published for 1998 and 2002, and are appropriate for the aim of this analysis.
An input-output (IO) table provides a complete and consistent picture of the flows of products and services in the economy as a whole for a given year. The table illustrates the relationship between producers and consumers as well as interdependencies between industries (e.g. exchange of intermediate goods). One can also find detailed information on input purchases made by each sector in the economy including purchases of imported commodities and their contribution to Gross Domestic Product.
Published on Thu, Jul 10 2008, 09:24 GMT
Yapi Kredi
| Yapi ve Kredi Plaza D Blok, Levent 80620 Istanbul
http://www.yapikredi.com | research@ykb.com
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This document is prepared by the Economic Research Department of Yapi Kredi Bank A.S by using official data. No responsibility is assumed for the accuracy of the information given in the document although utmost care has been taken in their compilation and processing.Interested in forex trading? forex brokerage firms!
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