An econometric model of the Japanese wool industry
Abstract
This study builds a monthly econometric model of the
Japanese Wool Textile Industry for the period from January
1968 to February 1975. In developing equations to explain
responses in the four major production sectors of the industry,
particular attention has been paid t o the influences of stocks
and the general level of Japanese economic activity. Besides
the traditional goodness of fit statistics for each equation,
simulation experiments conducted with the final version of
the model were used as a further tool for model evaluation,
and where poor results were encountered attempts were made to
isolate the cause, with particular emphasis placed on the
stability of the coefficients in the defective equations.
To further assess the impact of the two features mentioned
above, appropriate policy experiments were also conducted.
The major conclusion from the study is that stocks do
play an important role in the formulation of the greasy wool
purchases and output decisions; however, these effects stern
from the interaction of greasy wool input with stocks in the
former case and unintended stock changes in the latter; and
not through the stock levels in isolation as implied by many
comments on the industry. The level of economic activity
was also shown to have a significant impact on the industry,
with the policy experiments revealing that the largest response
was to changes in monetary conditions. Finally, the study
failed to discover price responses in all but the fabric sector, which implies that the concern of the operators in the
industry to meet production and sales targets overrode price
considerations in the sample period .