The Information Approach to the Prediction of Interregional Trade Flows.

In a recent article [5] published in the Cahiers économiques de Bruxelles Professor J. Waelbroeck analyzed world trade flows in a very interesting way. He took total exports to and total imports from each region as given and applied the RAS method—originally constructed for input-output analysis—to analyze the extent to which flows known from an earlier table can account for flows in a later year. The approach has some resemblance to certain aspects of bivariate information theory. The present paper takes this theory as a starting point to provide an alternative method of analysis. The empirical part of the paper is based on the same data as those which are used by Waelbroeck. It turns out that the two methods yield virtually equivalent results, which is not really surprising, but which sheds an interesting light on the nature of the RAS method. Section II considers international transaction shares from the standpoint of information theory; section III considers some empirical results, and a third prediction method; section IV the RAS method; section V, the information inaccuracy of forecasts of import and export distributions for individual regions; and section VI traces the E.E.C. and Communist policy effects. [ABSTRACT FROM AUTHOR]