Sekerka - Kyn - Hejl:  Price Systems Computable from Input-Output Coefficients



11. A note on practical applications




The present price model can be used in various ways.


(1) It can be used for an analysis of the economy. It is usually very difficult to compare economic indicators since they are influenced by price relations. This is especially true for international comparisons. The present model shows that some of these difficulties are side-stepped, if we express the various indicators in specially calculated price systems. Maximum characteristic roots la, lb, lc are the only aggregate characteristics of the economic system that are independent of relative prices and production structures. Two-channel prices for various values of the parameters n* and r*  show the relative capital and labor intensiveness of sectors, as illustrated in tables 1 and 2.

(2) The model can be used by a central agency for the calculation of mutually balanced price changes. A model of this type was used for this purpose in the general reform of wholesale prices that went into effect in Czechoslovakia on January 1, 1967. With the help of computers, the price indices of an F-two-channel price system were calculated (with r* = 0.06 and m* = 0.22) for 25000 groups of products. Such a large task, of course, presented a number of methodological, as well as practical computational, problems. Some of these problems are described in SEKERKA (1967), SEKERKA and MRENICA (1967), and SEKERKA and TYPOLT (1968).

(3) The model can be used for forecasting future price developments. Given expected technological changes and changes in the distribution of national income, we estimate future matrices A, B, C and parameters m*, n*, r*. We can then calculate expected changes in relative prices. In Czechoslovakia, several alternative forecasts of prices for 1970 and 1975 were calculated on the basis of this model. For further information about these calculations, see HEJL et al. (1966b), HEJL et al. (1967b) and KYN et al. (1966).



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