Dynamic input–output analysis

In dynamic input-output analysis investment meets the capital requirements of output growth. The model is linear and the proportionality between type i capital requirements and output j is represented by a capital coefficient. This chapter presents the dynamic input-output model, its solution, and two main issues, namely singularity of the matrix of capital coefficients and causal indeterminacy. Singularity is a mathematical problem that has been solved. Causal indeterminacy is the incompatibility between non-negative output solutions and arbitrary initial conditions, an issue related to the instability of the model. Alternative modifications of the model address the issue. The dynamic input-output model revives in three areas. Human capital formation is modeled to explain endogenous growth. Environmental accounts are added to analyze the depletion of nonrenewable resources. And lagged production and expenditure models are employed in disaster impact analysis.