Effects of Exogenous Price Changes on a Regional Economy: An Input-Output Analysis

THIS PAPER DESCRIBES A METHOD FOR INCORPORATING EXOGENOUS PRICE CHANGES INTO INPUT-OUTPUT ANALYSIS AND THEREBY ESTIMATING THEIR IMPACT ON A REGIONAL ECONOMY. THE EMPIRICAL RESULTS DEMONSTRATE THAT WHEN THE PRICES OF WHEAT, ELECTRICITY, PETROLEUM, AND NATURAL GAS ARE INCREASED BY EXOGENOUS FORCES, THEIR EFFECTS ON WASHINGTON STATE'S ECONOMY ARE SIGNIFICANT AND DIVERSE. THE METHOD CAN BE MODIFIED TO ENABLE ITS USE FOR FORECASTING ENDOGENOUS PRICE CHANGES, UNDER CERTAIN ASSUMPTIONS.