A new approach for the input-output price model

This paper proposes a new approach to measure the impact of a sector's price shock on price indices. It works based on table adjustments to trace the effects of any initial price shock through an iteration process. It has the same accuracy and all the capabilities of the popular Standard Leontief Price (SLP) model. A distinct advantage of the new approach compared with the SLP model, however, is its ability to measure the impact of the initial price shock on all value-added components if and when it is required. This capability enables researchers to use interindustry price analysis to tackle problems of a more real-world nature. Other advantages of this approach are its simple computational implementation, especially relevant for larger size interindustry tables, the unified way to deal with all kind of different price issues, and the yielding of an adjusted interindustry table reflecting all endogenous price adjustments in response to the initial price shock.

Research Highlights► Allows the estimation of prices when all value-added components are adjusted with respect to price indices. ► Provides a unified way to deal with all kind of price issues. ► Simple computational implementation makes it adequate for dealing with large size interindustry databases. ► Yields a fully adjusted interindustry table following the triggering price shock.