Page 35 - Azerbaijan State University of Economics
P. 35

THE                      JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 2, 2023, pp. 28-46

                    The variables in this case are total production (X), final consumption (Y), and a vector
                    of direct cost coefficients (A). The direct cost coefficient shows how much resources
                    from the i-th sector are required to make one unit of the j-th sector's product:

                                                            x
                                                      a =    ij  ,  i,j, 1=  ,2 ,...,n
                                                       ij  X  j

                    When we solve equation (1) in relation to X, we obtain:
                                               X =  İ ( −  A) − 1 Y                      (2)


                                  -1
                    Here,  B=(İ-A)  is called the full cost matrix.

                    Using equation (3), we can express the change ( X  ) in the total output vector X
                    when any change (  Y ) occurs in the final demand vector Y as:

                                               X = ( E −  A) −1  Y =  B Y       (3)

                    This is the input-output model's fundamental simulation equation.


                    It is evident that altering any one of its components can result in a change in the final
                    demand's volume. For instance, the demand for the final products of different sectors
                    rises  when  government  agencies'  investment  and  consumption  costs  are  altered
                    through the state budget. Consequently, the change in the final demand brought about
                    by a change in any one or more of the aforementioned components can be quantified
                    by using formula (3) to measure the change in the total output vector. Therefore, any
                    sector's  production  rises  in  response  to  a  rise  in  the  demand  for  its  products.
                    Simultaneously, the output-input model enables the estimation of the overall sum of
                    these effects when more intermediate consumption products utilized in other sectors
                    to  make  this  sector's  product  are  produced.  However,  only  the  multiplier  effects
                    resulting  from  production  relations  are  considered  in  the  input-output  model.
                    Additional multiplier effects are produced during the processes of income distribution,
                    redistribution,  and  use.  These  impacts  can  be  evaluated  by  utilizing  the  Social
                    Accounting matrix.

                    SAM based multiplier model

                    A Social Accounting Matrix (SAM) is an extensive database that encompasses an
                    economy  and  records  information  on  every  transaction  made  by  economic  actors
                    within  that  economy  over  a  given  time  frame  (Mainar-Causapé  et  al.,  2018).  By
                    include the entire path of income in the economy, a SAM expands the input-output
                    table.




                                                           34
   30   31   32   33   34   35   36   37   38   39   40