ABSTRACT
The demand-side or supply-side input-output models can be used to forecast sectoral outputs or inputs on the basis of known tables of intersectoral transactions for a base year, and final demand or value added forecasts for the desired year, respectively. The conventional wisdom is that the demand-side input-output model is more plausible on economic grounds than the supply-side input-output model. The principle that demand determines output has been left unchallenged by the complementary principle that supply determines input. Both models are based on the central insight that commodities are needed in the current production of other commodities. However, the supply-side model outperforms the demand-side model in three out of five near-term forecasts, which are more significant from the point of view of actual applications. In general, there is an indication that a sector becomes more supply-driven as it reaches maturity, that is, a stable pattern of interdependence with other sectors.
