The Transmission Mechanism of Financial Shocks
Edited by Satoshi Inomata
Chapter 8: Explanatory Notes
Satoshi Inomata A QUICK GUIDE TO THE INTERNATIONAL INPUT–OUTPUT ANALYSES What is an Input–Output Table? An input–output (I–O) table is a map of an economy, which compactly depicts all the flows of goods and services for a given period of time (usually one year), using recorded transaction values between industries. Its image is just like a piece of textile, woven from woof and warp. The woof (horizontal thread) is called a ‘row’, and the warp (vertical thread) is called a ‘column’. In the I–O framework the rows represent the supply sectors of goods and services while the columns are demand sectors, and their intersection gives the value of transactions made between these two industries. Table 8.1 shows a schematic image of an I–O table, of a hypothetical economy with only three industrial sectors: ‘Machinery’ manufacturing industry, ‘Steel’ manufacturing industry, and ‘Transport’ service industry. For example, looking at the intersection between the ‘Steel’ in the rows and the ‘Machinery’ in the columns, the value of ‘1600’ indicates that the ‘Machinery’ industry purchased steel products from the ‘Steel’ industry in a quantity of 1600 units. We may consider the case where a car manufacturer uses steel to produce car bodies. Subsequently, if we look at the intersection between ‘Transport (row)’ and ‘Machinery (column)’, the value is ‘400’, which shows that the ‘Machinery’ sector purchased transport services in a quantity of 400; say, the car manufacturer pays for the delivery of steel to its own...
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