Appendix B
Price Adjustment Procedure
The examination of the effects of structural changes in the economy requires an intertemporal comparison by handling changes in price levels. Using two input-output matrices for different years in current prices, we attempt to adjust coefficient matrices for s based matrices to the base year t (s>t) (e.g. see Günlük-Senesen and Küçükçifçi, 1994). The deflating procedure involves expressing As, the matrix of technical coefficients, in the price of the year t. We define Ast as As deflated with year s prices, so that
where Ps is the diagonal matrix of industrial price indices capturing changes in price levels from year t to s. From A-1, the typical element of Ast is
where Ps,i and Ps,j are changes in industrial price indices of sector i and sector j from year t to year s respectively, and the (Ps,j/Ps,i) term on the right-hand side captures the relative prices from year t to year s.