ON THE ECONOMIC INTERPRETATION OF THE BR�DY CONJECTURE

Henryk Gurgul and Tomasz W�jtowicz
Authors registered in the RePEc Author Service: Tomasz Wójtowicz ()

Economic Systems Research, 2015, vol. 27, issue 1, 122-131

Abstract: The aim of the paper is to study the economic aspects of the Br�dy conjecture: an increase in the size of a (random) input matrix causes a decline in the ratio of its subdominant and dominant eigenvalues and implies faster convergence to equilibrium [Br�dy, A. (1997) The Second Eigenvalue of the Leontief Matrix. Economic Systems Research , 9, 253-258]. Simulation results provide evidence that this ratio depends inversely on the level of data aggregation and can therefore not be a good indicator of the speed of convergence of an economy to its equilibrium path. We show that this is consistent with findings based on actual input-output tables of EU member states. These results imply that theorems about the speed of convergence of random matrices are not useful in describing the cyclical dynamics of real economies.

Date: 2015
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DOI: 10.1080/09535314.2014.979138

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