Introduction

Input–output transactions tables (IOTTs) provide a very convenient tool to understand an economy's sectoral interconnections. It provides both the production and the expenditure sides of the economy in a compact form and is a very practical way of presenting national accounts that must show a balance between the two sides for conceptual accuracy. We had a glimpse of the importance of this balance for economic analysis in the previous chapters and we will continue to exploit the interindustry relations in the rest of the book. However, since our experience concerns a multidimensional reality, capturing it in single or in two dimensions inevitably means a constrained view; but that serves to show how constrained we are.

What readily comes to mind is adding a time dimension to the two dimensional picture presented by the IOTTs. Just as a three dimensional object is sought to be understood by taking multiple slices – what can be thought of as two dimensional – of the object, we seek to understand an economy over time using multiple IOTTs at, more or less, regular intervals of time. While an IOTT may be viewed as a snapshot of the economy, it really represents an interval – a year, collapsed to a single point. In computing the input (or technical) coefficients we divide the specific input required to obtain a quantity of output over a year, by the output quantity. Thus we compute the average, and in this sense, representative coefficient for the year. One seeks to visualize a rule that explains movement from one observation to the next. Since reality is extremely complex, specification of a simple rule seems silly but its utility lies in generating an insight. In a simple dynamic analysis one may add a time dimension with a rule in the form of a fixed parameter, say, a uniform rate of growth of a variable per year to see its impact on some other variable under focus.