Chapter 7Global Dynamical Input–Output Modelling

Anthony P. Korte and Alan G. Wilson

7.1 Towards a Fully Dynamic Inter-country Input–Output Model

There is a wealth of literature on input–output (I/O) modelling – indeed, the model has iconic status. However, research challenges remain. The most common models are of a comparative static nature and are for a single country (or region or city). There is an extensive literature on making the models dynamic and, separately, on making them multi-country. The latter initiative involves modelling trade. The challenge in making the model fully dynamic involves modelling investment. Our objective in this chapter is to articulate a model that is multi-country, multi-sector and dynamic. We build on Duchin's single-country dynamic model (Duchin, 2004) and Wilson's multi-country dynamic model (Wilson, 2015), and in each case show how to generate versions of a fully multi-country, multi-sector, dynamic model. We proceed as follows. In Section 7.2, we articulate the accounts for a single country and show how to include endogenous final demand. We then extend the single-country model to be inter-country and show how to incorporate investment (Section 7.3). In Section 7.4, we further extend the argument to show how investment can be treated as capacity building on a planning basis in a global model; and in Section 7.5, we offer an alternative model in terms of investment growth. In each of these sections, we explore model dynamics with hypothetical ...

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