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

being ‘imported; and complementary imports, m,, namely 
goods like crude oil, raw cotton and wool, which are either 
not produced in Britain at all or are produced there only in 
relatively small quantities. We assume: that m, depends on 
‘he amount of money available from export sales and income 
received from abroad, after allowing for the necessary expen- 
diture on complementary imports and for the sums required 
for gifts or lending abroad; and that the elements of m, are 
proportional to those of g, the vector of output levels. If we de- 
note by B the balance of trade, that is the excess of the value of 
exports, p'«, over the value of all imports, p*,m, + b*,m,, 
where the p*’s denote vectors of foreign prices, then, following 
the argument of [7], 
m=m, +m, 
‘IV. 26) = [a +p*,! a, (p'x-a', P*, q—B)] + a39 
where the vector a, and a, contain the intercepts and slopes in 
the linear equations assumed to connect the elements of p*, my 
with their total, p*,"m,; and the elements of the vector a, are 
the factors of proportionality relating the elements of m, to 
the corresponding elements of gq. The only element of (IV. 26) 
which is so far unknown is g. It can be worked out from a 
revision of (IV. 1) which, with the complication of foreign 
trade, can be expressed as 
(IV. 27) =(—A -playa, pl) [v+e+(I—p~ta,p) x 
Third, we must allow for the fact that domestic prices are 
now affected because some of the inputs into British production 
come from abroad. Let each element of a vector % denote the 
Stone - pag. 54

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