Principles and Practices of the Inforum Interindustry Macro Model

Abstract

The macro-economic models which have become the standard tools of business forecasting are, with few exceptions, aggregate models. They determine output of the economy within the framework of the quarterly National Income and Product Accounts (NIPA) with additional series on employment or financial variables. In recent years, some of the research groups that began with aggregate models have expanded them to provide industry forecasts by use of input-output tables. The technique has been to distribute — often via constant matrices — the components of final demand to industries and then to use often constant input-output matrices to calculate indicators of industry outputs. Actual outputs are then related to these indicators by regression equations or factors to adjust for the errors in the method. The results are indeed industry forecasts more or less consistent with the forecasts of the aggregate model. The method has the advantage of being easy and inexpensive once one has an aggregate model. It also doesn’t “talk back” to the aggregate model, or assert any “opinion of its own” on the course of the aggregates.