DOI: 10.11611/yead.1899943 ISSN: 2148-029X

ON THE SENSITIVITY AND CONVERGENCE PROPERTIES OF THE LEONTIEF INVERSE: A LINEAR-ALGEBRAIC APPROACH WITH A FOUR-SECTOR APPLICATION

Özlem Orhan
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This study explores the economy-wide consequences of changes in food-sector demand using a four-sector input-output framework intentionally simplified yet reflecting key structural characteristics of the Turkish economy. The analysis is confined to Agriculture, Food, Trade, and Transportation to make the main transmission mechanisms of demand shocks transparent. We establish a demand-driven Leontief model and assume that final demand for food products increases by 20% and then decreases by 20%. Subsequently, we monitored how this interest affected other aspects of the market through their interconnections. The results show that if food demand declines by 20%, the corresponding decline in overall output is approximately 23 billion TL. This demonstrates that a 1 lira decrease in demand for Food results in 1.99 liras in overall output. This shift influences various sectors of the economic structure differently. Agriculture is severely affected because it supplies many of the inputs required by the Food sector. Trade and Transport are not primarily influenced, as they don't directly produce it. Overall, this indicates that the Food industry, together with its vendors, is closely associated. Gradually, results have shown that input-output models are useful for analysing sectoral demand shocks.

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