pci . imp i

r

1

^impi

1

^{i m p i}

i i

T h e variables used have been derived in Section 2 . 2 . Calculated p r i c e indexes a r e deflated to be equal to 1 in 1972. In general, the higher this indicator the m o r e favorable a r e the contributions of international price and domestic cost developments to the gains from international trade. The index does not show, however, the absolute level of gains from trade.

Before going on to evaluate the r e s u l t s , we must make s o m e r e m a r k s on the limitations of the method used.

The most unrealistic assumption of the input-output model i s that of the homogeneity of s e c t o r s . If we were to accept this assumption fully we could not explain the existence of both exports and imports within a given s e c t o r . One refinement would be to a s s u m e that exports, goods for domestic use, and imports, w i t h i n t h e s a m e i n d u s t r y a r e substitutable and that their prices a r e related to their rates of substitution. T h i s would mean that costs per unit of output would be roughly the s a m e for exports and import substitutes. In fact, this formulation is particularly inappropriate for the Hungarian input-output table, where goods for domestic use, exports, and imports a r e valued a t prices almost totally unrelated to their r a t e s of substitution.

T o minimize the effects on o u r indicator of different cost/output levels a r i s i n g from distortions in the measurement of output, calculated prices w e r e all deflated to a 1972 basis. This procedure excludes any effects of differences in the cost levels of various industries on the dynamics of trading gains.

(Shifts of the overall export o r import s t r u c t u r e toward s e c t o r s with different cost levels may have such effects.)

T h e indicator can be usefully reformulated a s follows:

1

^pci

^.

^imp _i

price t e r m s of trade

cost t e r m s of t r a d e

T h i s emphasizes the fact that t e r m s of t r a d e in a broader s e n s e depend both on the p r i c e t e r m s of trade-what we normally imply when we speak of

t e r m s of trade-and on the corresponding c o s t t e r m s of t r a d e . In theory, each

TABLE 1 Components of Hungarian terms of trade, 1965-1979. 1 2 3 4 5 6 7 8 9 Export Import Calculated Calculated Relative Relative Price terms Cost terms Total terms price price export import export import of trade of trade of trade Year price price price price 1/3 2/4 1/2 4/3 7x8 1965 1.112 1.256 1.175 1.157 0.546 1.086 0.585 0.985 0.871 1966 1.000 1.157 1.066 1.057 0.938 1.094 0.864 0.992 0.856 1967 1.029 1.172 1.088 1.058 0.545 1.116 0.678 0.965 0.847 1968 0.051 1. 086 1. 017 1.020 0.935 1. 058 0.876 1.008 0.884 1969 1.105 1.233 1.165 1.126 0.957 1. 098 0.896 0.973 0.872

-

w 1970 1.146 1. 008 1.164 1.114 0.985 1. 046 0.961 0.940 OD 0.975 1971 1.006 1.041 1.029 1.030 0.979 1.008 0.976 0.005 0.971 1972 1.001 1.000 1.000 1.000 1.001 1.000 1.001 1.000 1.001 1973 0.909 0.960 1.072 0.940 0.987 1.001 1.000 0.976 0.850 1974 0.896 1.046 1.001 0.886 0.595 I. 054 0.854 0.995 0.800 1975 0.808 0.983 0.921 0.931 0.878 1.056 0.822 1.011 0.831 1976 0.898 1.045 1.001 1.825 0.897 1.820 0.850 1.024 0.850 1977 0.899 1.008 1.962 1.004 0.915 1.004 0.552 1.022 0.912 1978 0.927 0.999 0.988 1.015 0.929 0.924 0.929 1. 017 0.944 1979 0.832 0.910 0.003 0.919 0.916 0.990 0.915 1. 012 0.920

We s e t up a s e r i e s of r e g r e s s i o n equations f o r both e x p o r t s and i m p o r t s . T h e dependent v a r i a b l e w a s in each c a s e the s h a r e of s e c t o r a l e x p o r t s o r im- p o r t s in the total, while the explanatory v a r i a b l e w a s the r a t i o of the foreign t r a d e p r i c e to d o m e s t i c c o s t s .

F o r e x p o r t s , a positive sign f o r t h e coefficient of the explanatory v a r i a b l e indicates that the industry concerned behaved well f r o m the point of view of c o m p a r a t i v e c o s t theory, expanding its e x p o r t s h a r e when d o m e s t i c c o s t s d e c r e a s e d in relation to international p r i c e s . F o r i m p o r t s , a negative sign indicates s i m i l a r l y "good" behavior. However, the r e s u l t s f o r i m p o r t s should TABLE 2 L a s p e y r e s and P a a s c h e indexes of r e l a t i v e p r i c e s

-

E x p o r t s I m p o r t s

Y e a r L a s p e y r e s P a a s c h e sign. of L a s p e y r e s P a a s c h e sign. of d i f f e r e n c e

.

d i f f e r e n c e

1966 1.012 1.005 ^- 1.016 1.012 -

1967 0.987 0.984 - 1. 026 1.020 ^-

1968 0 . 9 9 0 0.988 ^- 0.956 0.946 ^-

1969 1.053 1.053 0 1. 065 1.054 ^-

1970 1.015 1.015 0 0.956 0.952 -

1971 1.033 1.045

+

0.968 0.968 0

1972 1.036 1.024 0.998 0.999

+

1973 0.989 0.987 ^- 1.006 1.002 -

1974 0.916 0.908 - 1.072 1.052 ^-

1975 1.012 1.023

+

1.013 1.023

+

1976 1. 016 1.036

+

^{1.000 0.997 -}

1977 1.025 1.026

+

0.996 0.993 ^-

1978 1.022 1.022 0 0.987 0.989

+

1979 0.978 0.982

+

0.998 0.998 0

be t r e a t e d v e r y cautiously; while the d o m e s t i c c o s t s of e x p o r t s a r e m o r e o r Less m e a s u r a b l e , the meaning of the c o s t s of i m p o r t substitution is m o r e questionable.

F o r e x p o r t s , s e v e n i n d u s t r i e s have equations w h e r e the p r i c e v a r i a b l e h a s significantly the a p p r o p r i a t e sign. T h e m a j o r i t y of the textile industry belongs to this group; h e r e i n c r e a s i n g c o m p a r a t i v e c o s t s and a d e c r e a s i n g s h a r e in total e x p o r t s prevail. In the pharmaceutical industry, a n expansion i s coupled with improving c o m p a r a t i v e c o s t s .

Fifteen i n d u s t r i e s have equations with a significantly wrong sign f o r the p r i c e v a r i a b l e . Machine i n d u s t r i e s show the m o s t conspicuous r e s u l t s . H e r e the rapid expansion of e x p o r t s h a s taken place a t the s a m e t i m e a s a m a r k e d d e t e r i o r a t i o n in the p r i c e / c o s t r a t i o . T h e c l e a r d i f f e r e n c e between the d i r e c - tions of the two t r e n d s shows that the expansion of e x p o r t s was not a r e s u l t of the improving competitiveness of Hungarian goods on the world m a r k e t . On the c o n t r a r y , it actually took place against the background of a widening g a p between Hungarian technology and world m a r k e t s t a n d a r d s .

When d r a w i n g conclusions we should of c o u r s e not forget the limitations of o u r method. We cannot, f o r instance, d i f f e r e n t i a t e between the c o s t s of

production for exports and those for goods for domestic use. But a s the share of exports in the total gross output of the machine industries is no more than about 20

%,

the development of the costs of "export industries1' may differ from that of "domestic industriesT1. However, even if these cost dynamics do differ, the data clearly show a relative deterioration in the international competitive position of the machine industry a s a whole. in machinery a r e not comparative cost differentials but product differentiation and economies of scale.

In other industries, even where we obtain significant coefficients for prices (such a s pharmaceuticals, rubber), the explanationd imports may not lie in finished products. Second, some imports fill transitory gaps between domestic (and ruble-area originated) supply and demand. Unforeseen changes in demand or interruptions in supply may cause such imports. This type of situation is

domestic activities. When applying the model for practical forecasts, it must also be remembered that the time horizon of the forecast is expected to be about ten y e a r s , in other words, not much less than the observation period. The economic system of Hungary changed greatly during the observation period and there is good reason to suppose that it may change even more in the coming question whether, in any future economic framework, relative sectoral prices will have an effect on the sectoral structure of trade. Research experience in the explanatory variable for the equations describing these industries. Most of the light industries, a s well a s ferrous metals, belong to this group. F o r the trous sacrifices in prices and therefore production capacity utilization is high.

The share of exports in total output i s sufficiently high that changes in domestic gible proportion of export trade. Although exports from these industries follow

world market trends, their exports, exhibit rather l a r g e fluctuations, presumably because t'ney partly s e r v e the purpose of draining the fluctuating surpluses of the domestic m a r k e t . In the equations, world market demand captures the long-term developments in these industries and changes in the sum of domestic output and imports reflect short- term demand shocks.

Data on World Demand. The s e r i e s of models in the international INFORUM system would ideally seem to be the best s o u r c e of data for the foreign demand variable of the Hungarian model. However, at the present early stage of both the Hungarian model and the INFORUM system it seemed simpler to use UN statistics.

Output indexes in a 13-industry breakdown f o r Western Europe w e r e considered a s indicators of demand in Hungary's main export m a r k e t s . As exports a r e treated in m o r e detail in the model than in the UN output statistics, the s a m e index value was used w i t h i n groups of industries in the model.

3 . 3 . Import Equations

As our investigation has shown, imports do not s e e m to depend on prices It is assumed in the model that domestic s a l e s act a s an indicator of demand to explain the development of imports over time.

REFERENCES

Almon, C. and Nyhus, D. (1977). The INFORUM

international system of input-output models and bilateral trade f l o m

.

INFORUM R e s e a r c h Report No. 21. Department of Economics, University of Maryland, College P a r k , Maryland.

Armington, P . (1969 a ) . A Theory of Demand for Products Distingnished by Place of Production.

IMF Staff P a p e r s , 16. pp. 159-177.

Armington, P . (1968). The Geographic Pattern of T r a d e and the Effects of P r i c e Changes.

IMF Staff P a p e r s , 16, pp. 179-197.

B a l a s s a , B . (1965). T r a d e Liberalization and Revealed Comparative Advantage.

Manchester School, 33, No. I, pp. 99-123.

B a l a s s a , B . (1979). The changing Pattern of Comparative Advantage in Manu- factured Goods. Review of Economics and Statistics, 59,

NO 2, pp. 259-266.

L e a m e r , E . E . and Stern, R . M . (1970). Quantitative International Economics.

Allyn and Bacon, Boston.

Im Dokument Proceedings of the Fourth IIASA Task Force Meeting on Input-Output Modeling (Seite 124-131)