Input-output price indexes: forgoing the Leontief and Ghosh models

Louis de Mesnard

Economic Systems Research, 2024, vol. 36, issue 2, 201-225

Abstract: In input-output analysis, the Leontief and Ghosh models can be used to determine the price indexes of goods, which is convenient for analyzing inter-industry inflation. Their respective merits are debated, but both provide the same solution. We demonstrate that, contrary to common belief, it is superfluous to use the Leontief or Ghosh model to calculate price indexes: the price index vector alone satisfies the accounting identities without assuming constant coefficients. So, in contrast to the Leontief and Ghosh models, price indexes can be derived ‘instantly’, without a round-by-round process. Conducting research on price indexes deduce from the Leontief or Ghosh model becomes pointless: it suffices to study price indexes deduced from the data. We illustrate these findings with an application for France 2018. The same is demonstrated for prices with the data given in physical quantities.

Date: 2024
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DOI: 10.1080/09535314.2022.2164179

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