The RAS Approach in Updating Input-Output Matrices: An Instrumental Variable Interpretation and Analysis of Structural Change

The main purposes of the paper are to reconsider the rationale of the RAS method, and to attempt to improve on its interpretation and usefulness. The substitution and fabrication factors in the RAS method are interpreted as statistical estimates obtained by the method of instrumental variables. This...

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Bibliographic Details
Published in:Economic systems research 1998-03, Vol.10 (1), p.63-78
Main Author: Toh, Mun-Heng
Format: Article
Language:English
Subjects:
Adjustment costs
Econometrics
Economic forecasts
Economic models
Economic theory
Empirical research
Input output analysis
instrumental variables
Lagrange multipliers
Multiplier
RAS method
relative precision of coefficients
sectoral optimization model
Structural adjustment
Structural change
Studies
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Summary:The main purposes of the paper are to reconsider the rationale of the RAS method, and to attempt to improve on its interpretation and usefulness. The substitution and fabrication factors in the RAS method are interpreted as statistical estimates obtained by the method of instrumental variables. This enables the computation of asymptotic standard errors for the factors and the relative precision of the predicted technical coefficients. Furthermore, an adjustment cost minimization model to describe how a sector determines its substitution and fabrication factors is presented. The solutions of the model provide another rationale for the RAS method, and the associated Lagrangian multipliers can be useful for assessing structural constraints and structural change.
ISSN:0953-5314
1469-5758
DOI:10.1080/09535319800000006