Abstract
Concerning trade friction between US and Japan, current policy option is directed to deregulation on trade after discussing the options of increasing final demands and of adjusting exchange rate. Although expressing deregulation in an econometric model is not easier issue, it may be possible to alter parameters of structure of the model.
This article examines an effect of deregulation by the use of multilateral input-output system linked with macroeconometric models. For this purpose we first describe a framework of international input-output system, in which elasticity of relative price will determine trade indirectly because hmport is affected by relative price in virtue of elasticity according to the Armington assumption. As a trade system sensitive to a relative price change may increase imports, elasticity of relative price may be interpreted as a measure of reflecting relative price change. As regulation on trade is dependent of the industry, it is appropriate to assign different value for each industry. And finally it is concluded that deregulation have an effect of increasing imports to a certain extent.
