A short-run econometric model of the Japanese wool textile industry

Abstract

Few models of the Japanese wool textile industry have been constructed, despite the importance of the Japanese as the largest purchasers of Australian wool on a single-country basis. This paper constructs a twenty-five equation, monthly model explaining the flow of material through the various processing stages of the industry from greasy wool imports to fabric production. The model was estimated over the period 1968 to 1976 and its performance in dynamic simulations over the same period was good until 1975 when a cartel was implemented. Forecasts outside the sample period for 1977 were satisfactory. The model demonstrates the role of stocks within the industry and concludes that there exists a lengthy lag in the response of wool purchases to changes in Japan's economic activity