Decomposition of GDP-growth in some European Countries and the United States

Henk Kranendonk and Johan Verbruggen

No 203, CPB Memorandum from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: 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.

JEL-codes: C67 O40 (search for similar items in EconPapers)
Date: 2008-09
New Economics Papers: this item is included in nep-eec
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Citations: View citations in EconPapers (12)

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Journal Article: Decomposition of GDP Growth in Some European Countries and the United States (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:memodm:203

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