Socio-Econ. P&n. Sci. Vol. 18, No. 3, pp. 167-169, 1984 00384121/84 $3.00 + .

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THE MODEL BASED ON THE MATRIX OF

ECONOMIC GROWTH

DRAGISA STOJANOVIt:
11000 Beograd, Hajduk Veljkov venac lZ/VIII, Yugoslavia

(Received 25 September 1983)

Abstract-This paper is concerned with some aspects of direct and indirect growth rates of sectors and
with the model based on the matrix of economic growth. The purpose of this consideration is to determine
through indirect growth rates the growth structure of economy and to construct the model which may
be used for the planning goals. In other words, by means of the matrix of growth or the model which
is based on it we can estimate the future development of the economy. This can be done under different
assumptions no matter whether relations are transfered from the past into the future or whether various
relations change in future periods on the basis of streamlined elements of the plan. Hence, it can be
determined either from the assumption that past relations will be kept approximately in the same frames,
or that they will change in the future. In each case all the changes can be described through direct and
indirect growth rates.

INTRODUCIlON The indirect (cross) rate of growth of the ith sector

In this paper we shall consider methodological as- in relation to the jth we define as the relationship of
pects of the system which encompasses economic the increment of production AX, in the period
movements on the basis of direct and indirect growth (t - 1, t) and the amount of production in the jth
rates or rather the system which expresses the direct sector Xj, in the period t, i.e.
and indirect (cross) growth rates for all the sectors of
economy simultaneously and to present thus, in the AX,
rU1= 7 i,j = 1,2 ,...n. (2)
general form, the growth of the economy through the
matrix of growth. The investigation of such system
adds to the better understanding of relations among These rates of growth can be expressed in the form
sectors of the economy, to their coordination and of the matrix of growth
future programming.
The needs for the investigation of systems expres-
sing the connection among economic sectors are +{$ ::::::::;;r~ (3)
relatively large. They are outstanding particularly
when the movement of economic sectors becomes
evident through direct rates of growth, which are where the elements on the main diagonal are direct
often independent and cannot be linked together into while the others denote indirect rates of growth of
a simultaneous dynamic system. There is a large corresponding sectors of the economy.
number of theoretical and practical models in the Let us start now from the relation (1) in the form
area of economic development dealing with these
problems. These are particularly the Dynamic Anal- X,,-AX,=x+,, i=1,2 ,... n, (4)
ysis models, the Input-Output Analysis (static and
dynamic models), the Linear Programming (es- and assume that among the observed quantities exists
pecially models based on the decomposition prin- an interdependence, so that the change (increment) of
ciple), models based on Dynamic Programming, etc. production of the ith sector AXi, is, generally speak-
However, none of the above mentioned mathematical ing, a function of production in the observed sec-
and methodological models comprises the indirect tors Xi,, i.e.
rates of growth and systems based on them, even
through it is possible to express in this way complex AX,,=Fi(X ,,,... Xnt), i=1,2 ,... n. (5)
economic movements and to carry out programming
under different conditions.
The relation (4) can be written then in the form of the
THE MATRM OF GROWTH following system [5]
Let us examine now methodological aspects of
Xi,-c{;(x ,,,... X.,)=X+,, i=1,2... n. (6)
problems which are connected with the matrix of
growth and with corresponding systems.
Let us denote by Xi, and Xi,,_ ,(i = 1,2,. .n) prod- If instead of the general form of the function (5) is
uction of the ith sector during the periods t and t - 1, observed the interdependence in the linear form by
respectively. The absolute change (increment) f means of indirect rates of growth, i.e. if we start from
production of the ith sector during the period the following form [ 1,2]
(t - 1,t) is:
AX,, = i = 1,2,... n. (7)
dX,=Xi,-Xi,,-,, i=1,2 )... n. (1)
167
168 D. STOIANOVIC

then it is possible to write the system (6) After successive elimination, we have

X$,,_,, i=1,2 ,... n. (8) (I-~R,)...(I-~R,)X,=X,, (13)

In the matrix form the system (8) may be written The solution of the system is

(G&)X,=X,_,, (9) &=[(I-&R,)...(I-&R+ (14)

where I and R denote the unit matrix and the matrix
of indirect growth rates and X, and X1_, the vectors
of production of the observed sectors.
The solution of system (9) gives
X,=(I-&R)IX,-,.
the link between the vectors of production in the
periods t and t - 1, through the matrix of indirect
rates of growth. In this way it is possible to estimate
the vector of production in the period t on the basis
of indirect rates of growth and the given vector of
The system which we have obtained shows that the
vector of production X, in the Tth period may be
expressed by means of the initial vector X0 and the
matrices of growth R,, R,, . R, which correspond to
successive periods.
If we assume that the matrices of growth in the
(10)
successive periods are equal, i.e. R,= I?, for
t = 1,2, . . T, where we denote by R the average
(constant) matrix of growth in the period (1, T), the
the relation (14) may be written in the form
x+-~R)p. (15)

production in the period t - 1.

The eqn (9) expresses the connection between
vectors of production during the periods t and t - 1.
The linking of the vector X, may comprise several
periods in the past so that it may be expressed in the
function of the vector of the initial state X,, and the
corresponding matrices of growth during succesive
periods. The procedure may be used for goals of
planning since it is possible to watch similarly the
future relations by means of matrices whose elements
would be estimated in advance.
In order to indicate this connection let us start
from the relation
(I--&R,)X,=~,-,,
where the matrix of growth R, corresponds to the
period t. During a longer interval of time (1, T),
which is divided into equal periods, i.e. for t = 1,2,. .
T, we have the following relations[4]
The elements of the average matrix of growth Rare
determined on the basis of weighted average, i.e.
T
C r,,,X,,
- ,=I
(16)
EXAMPLE
Let us observe the movement of production in
some sectors of the Yugoslav economy. (For tech-
nical reasons we shall consider only five sectors of the
(11) economy, as it may be seen in the table).
Let us determine the average matrix of growth of
production by sectors which comprise the direct and
indirect growth rates.
The vector of production increments in the period
1975-80 is

(I-&R>,, =X,, AX,,,,,, = {42,6, 12,7, 15)

and the vector of reciprocal values of production in

.. .. . . . ..
. (12) the period 1975-80 is

(il -R,
n-1
1
)X,=.X_,,

Table 1. Movement of production by sectors

Sectors 1975 1976 1977 1978 1979 1980

1, Manufacture 107 111 122 132 143 149

2. Agriculture 45 48 51 48 51 51
3. Construction 30 31 34 38 42 42
4. Transport 25 25 27 30 31 32
5. Trade 52 53 57 63 66 67

In billion of Yugoslav dinars.

Source: Statistical Yearbook of Yugoslavia 1983.
 The model based on the matrix of economic growth 169

The outer product of vectors dXr9rSS0 and According to eqn (15) we can write
(l/X,,,,,,) gives the average matrix of growth of
production[3]

where n = 5 and X,,,, and X,,,, denote vectors of

production by sectors in 1980 and 1985.
The solution of the system gives estimated values
of production by sectors in 1985,
6 1 1 1 1 1
= ‘; ,( 657’ 249’ 187’ 145’ ->
306 X ,985= (201.9; 58.9; 57.1; 41.0; 86.2)

15 Finally, we can conclude that the new meth-

odological procedure is appropriate for the pro-
or gramming in the economy by means of indirect rates
of growth and systems based on them. Instead of
0.064 0.169 0.225 0.290 0.137 observing the movement of production by sectors
0.009 0.024 0.032 0.041 0.020 through direct rates of growth without being able to
&Wo = 0.018 0.048 0.063 0.083 0.039 establish a corresponding system, we may connect,
0.011 0.028 0.037 0.048 0.023 through the definition of indirect relations, the corre-
0.023 0.060 0.080 0.103 0.049 I sponding movements in sectors and establish on them
:
a system which may be used for the planning goals.
The meaning of elements of the growth matrix may There is a certain connection between the two ap-
be obtained through the vector of growth. The first proaches. Namely, for a known set of direct rates of
column of the matrix R denotes thus the vector of growth we may always determine a corresponding
growth whose elements express the average rates of matrix of growth and, vice versa, for the given matrix
growth of production by sectors if compared to of growth we can determine a set of direct rates of
production in Manufacture in the period 1975-80. growth through corresponding systems. The meth-
The first row denotes the vector of growth whose odological procedure helps us thus to complete our
elements stand for the growth of production in insights into possibilities for the programming of
Manufacture compared to the production of other economic movements.
sectors, i.e. if compared to Agriculture, Construction,
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0.023 0.060 0.080 0.103 0