Full text: Study week on the econometric approach to development planning

Here the suffixes 0 and 1 denote respectively the base year and 
the projection year; and y,, denotes a geometric index of price 
ratios (year I in relation to year o) with the elements of b 
appropriate to the projection year as weights. The value of p, 
is then a multiple of p*,, the multiplier depending on the 
increase in real consumption assumed between the base year 
and the projection year. 
Once we have reached the end of the circuit of real flows, 
we obtain, as in (IV. 8), a vector, f, of primary inputs, or 
value added, per unit of output. From this we can recalculate 
the price vector from the relationship 
(IV. 24, 
We must now recalculate p*, and continue until the price 
vector in the projection year ceases to change. Only a single 
cycle of calculations is shown in diagram 4. 
c) The foreign trade circuit. The introduction of foreign 
trade complicates two of the relationships given so far and 
adds a new one. 
First, in calculating investment demands we must allow for 
exports and their expected rates of growth. If we denote the 
export vector bv x and the rates of growth of its components 
by s, then, in place of (IV. 4), we have 
(IV. 2y) 
(I —A) 1) (70 e + so 
Second, we must allow for the fact that part of the goods 
needed by the economy will come from imports, and so the 
demands on domestic production will be affected. We divide 
imports, the elements of a vector m, into two categories: com- 
petitive imports, m,, namely goods like steel, cars and clothing, 
which are produced in large quantities in Britain as well as 
1] Stone - pag. 53

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