Decomposition of GDP Growth in Some European Countries and the United States |
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Authors: | Henk Kranendonk Johan Verbruggen |
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Institution: | (1) CPB Netherlands Bureau for Economic Policy Analysis, P.O. Box 80510, The Hague, 2508 GM, The Netherlands |
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Abstract: | Summary The composition of economic growth can be analyzed in two different ways. In the ‘traditional method’ for the decomposition
of GDP growth, total imports are deducted from exports. This approach underestimates the importance of exports for the growth
in GDP, and overestimates the importance of domestic expenditure categories. In the alternative methodology proposed in this
paper, imports are allocated to all expenditure categories. Although this ‘import-adjusted method’ is more complex than the
‘traditional method’, it has the considerable advantage that the contributions of the expenditure categories to GDP growth
provide a better understanding of why GDP growth decelerates or accelerates. The methodology and data requirements for calculating
the import content of final demand, and the implications for the decomposition of real GDP growth, are discussed. For six
European countries and the United States, the paper shows that applying the alternative methodology provides rather a different
economic story.
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Keywords: | contribution demand categories GDP growth imports |
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