Transport impact analysis and price propagation effects in Johansen models

Abstract

In this paper is a simple Johansen approach to multiregional economic modeling addressed. We reformulate a partial equilibrium model to analyze traffic and trade changes in a interregional economy due to exogenous shocks in transportation costs. A biregional model about Friuli-Venezia Giulia and the Rest of the Country is used to numerically assess the effects on prices, output and imports of hypothetical reductions in transportation costs between these regions. Since prices play an important role to determine new equilibrium, we derive input/output elasticities and introduce a graph theory approach to decompose propagation mechanisms in nominal and real quantities.