Exports by product are a function of foreign demands for imports and relative prices, which incorporate exchange rate movements. Imports by product are a function of product-specific domestic demand and relative foreign to domestic prices. The solution for output is an iterative one. Because current output, imports, and inventory change depend upon one another, these three sets of equations are solved together. The equations recognize that the influence of output is not symmetric over the business cycle.
Employment is determined by labor productivity, output, and the length of the work year.
The real side of the model is defined in terms of products. Final demands are demands for products. Statistics on prices measure the prices of products. Our bridge translates value-added between its product and industry classification. This translation is made in both directions.