Application of an Input-Output Econometric Model to Investigate the Illawarra Economy

There are a number of tools that regional analysts apply to analyse and forecast the economy of a region. Two of the most commonly used tools are input-output (IO) modelling and econometric modelling. However, the standalone IO models are static and have restrictive assumptions of constant returns to scale. On the other hand, the econometric models lack the detailed sectoral disaggregation of IO models. As a result the integrated econometric input-output (EC-IO) modelling attempts to consider the timeline of the economy through time series in order to provide a more accurate picture of the dynamic characteristics of structural changes in a regional economy. This paper applies the integrated EC-IO modelling to the Illawarra region of New South Wales, in order to achieve higher level of accuracy in analysis and forecasting the structural changes in the regional economy. JEL Classification: R15, C 53, C67