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International Futures Help System

Economic Linkages

Several variables, such as gross production, stocks, consumer spending, trade, prices and investment, are common to both the economic model and the two physical models. But hardly ever will the economic and physical models produce identical values, even during the first time step when both utilize "data." Thus, although we want the physical model value to override that of the economic model, it cannot simply replace it. Instead IFs extensively uses a procedure of computing an adjustment coefficient during the first time step. That coefficient is the ratio of the value in the economic model to the value in the physical model. In subsequent years IFs uses that coefficient to adjust the value from the physical model before its introduction into the economic model.

Gross production (ZS) in the agricultural sector illustrates this procedure. The value of gross production in the agricultural model is the sum of the products of agricultural production (AGP) and prices (WAP) in each agricultural category. Multiplying that times an adjustment factor (ZSF) computed in the first time stop to assure inter-model consistency produces gross production for the economic  (ZS). World average prices (WAP) are used in all the economic/physical model conversions because they assure that global sums (e.g. of exports and imports) will balance. [1]

ag equation 84


ag equation 85

Similarly, food stocks in each category (FSTOCK) and an adjustment factor (FSF) produce stocks (ST) for the economic model.

ag equation 86


ag equation 87

A similar translation is made for consumer spending on agricultural commodities, recognizing that not all crop demand is directly by consumers.

ag equation 88


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In the same fashion exports (AGX) and imports (AGM) from the agricultural model allow calculation of exports (XS) and imports (MS) for the economic model.

ag equation 90


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A check and, if necessary, adjustment is made ensure that the monetary values of imports and exports match up at the global level.

ag equation 94


ag equation 95

With respect to prices, the agriculture model passes to the economic model a value (PRI), which reflects the ratio of the current domestic crop price index to the initial world crop price index.

ag equation 96

Finally, investment need (INAG) is passed to the economic model under the variable name IDS, category 1 (agriculture).


[1] s in the subscript represents economic sector. s = 1 is defined as the agriculture sector.