A Non-Possibility Theorem for Joint- Stability in Interindustry Models

• Authors: Ferran Sancho.
• BSE Working Paper: 110069 | September 15
• Keywords: Interindustry modeling , joint-stability , demand-driven , supply-driven
• JEL codes: C62, C67, O21
• Interindustry modeling
• joint-stability
• demand-driven
• supply-driven

Joint-stability in inter-industry models relates to the mutual simultaneous consistency of the demand-driven and supply-driven models of Leontief and Ghosh, respectively. Previous work has claimed joint-stability to be an acceptable assumption from the empirical viewpoint, provided only small changes in exogenous variables are considered. We show in this note, however, that the issue has deeper theoretical roots and offer an analytical demonstration that shows the impossibility of consistency between demand-driven and supply-driven models.