IDEAS home Printed from https://ideas.repec.org/a/bla/revinw/v56y2010i3p498-518.html
   My bibliography  Save this article

Real Gross Domestic Income, Relative Prices, And Economic Performance Across The Oecd

Author

Listed:
  • Ryan Macdonald

Abstract

This paper uses OECD data to examine changes in labor productivity, real gross domestic product (GDP) and real gross domestic income (GDI), economic aggregates, and relative economic growth over time. Real GDI combines changes in production (real GDP) with a trading gain derived from relative price changes. The paper considers two sources of trading gains: the terms of trade, and the real exchange rate. For OECD countries, the terms of trade is the more important price ratio, making a contribution to real income growth that is, on average, an order of magnitude larger than the real exchange rate. Over long time periods, the most important source of real income growth is changes in production. Over shorter time horizons, however, the trading gain can make noteworthy contributions. Changes in aggregates like real private consumption, or the relative economic performance of nations, are shown to be particularly dependent on the trading gain during the large swings in resource prices that occurred post‐2002.

Suggested Citation

  • Ryan Macdonald, 2010. "Real Gross Domestic Income, Relative Prices, And Economic Performance Across The Oecd," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(3), pages 498-518, September.
    • Handle: RePEc:bla:revinw:v:56:y:2010:i:3:p:498-518
    DOI: 10.1111/j.1475-4991.2010.00399.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1475-4991.2010.00399.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1475-4991.2010.00399.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:bla:revinw:v:17:y:1971:i:3:p:285-97 is not listed on IDEAS
    2. Kohli, Ulrich, 2004. "Real GDP, real domestic income, and terms-of-trade changes," Journal of International Economics, Elsevier, vol. 62(1), pages 83-106, January.
    3. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
    4. repec:bla:ecorec:v:78:y:2002:i:242:p:312-26 is not listed on IDEAS
    5. Michael Francis, 2007. "The Effect of China on Global Prices," Bank of Canada Review, Bank of Canada, vol. 2007(Autumn), pages 14-26.
    6. Yoshimasa Kurabayashi, 1971. "The Impact Of Changes In Terms Of Trade On A System Of National Accounts: An Attempted Synthesis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 17(3), pages 285-297, September.
    7. W. M. Corden, 1960. "The Geometric Representation of Policies to Attain Internal and External Balance," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 28(1), pages 1-22.
    8. W. E. G. Salter, 1959. "Internal And External Balance: The Role Op Price And Expenditure Effects," The Economic Record, The Economic Society of Australia, vol. 35(71), pages 226-238, August.
    9. T. W.Swan, 1960. "Economic Control In A Dependent Economy," The Economic Record, The Economic Society of Australia, vol. 36(73), pages 51-66, March.
    10. Todd Hirsch, 2003. "Updating the Bank of Canada Commodity Price Index," Bank of Canada Review, Bank of Canada, vol. 2003(Spring), pages 31-33.
    11. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    12. Charles R. Hulten & Edwin R. Dean & Michael J. Harper, 2001. "New Developments in Productivity Analysis," NBER Books, National Bureau of Economic Research, Inc, number hult01-1.
    13. Corden, W M, 1984. "Booming Sector and Dutch Disease Economics: Survey and Consolidation," Oxford Economic Papers, Oxford University Press, vol. 36(3), pages 359-380, November.
    14. Ulrich Kohli, 2006. "Terms-of-Trade Changes, Real GDP, and Real Value Added in the Open Economy: Reassessing Hong Kong's Growth Performance," Working Papers 052006, Hong Kong Institute for Monetary Research.
    15. Kevin J. Fox & Ulrich Kohli & Ronald S. Warren Jr., 2002. "Accounting for Growth and Output Gaps: Evidence from New Zealand," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 312-326, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Klaus Abberger & Wolfgang Nierhaus, 2018. "Terms of Trade und Trading Gain in Deutschland und der Schweiz: – Ein Ländervergleich," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(06), pages 38-42, March.
    2. Robert G Gregory, 2012. "Living standards, terms of trade and foreign ownership: reflections on the Australian mining boom," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(2), pages 171-200, April.
    3. Ville Kaitila, 2016. "GDP growth in Russia: different capital stock series and the terms of trade," Post-Communist Economies, Taylor & Francis Journals, vol. 28(2), pages 129-145, April.
    4. Wolfgang Nierhaus, 2019. "Realwert des Bruttoinlandsprodukts und Terms of Trade: Methodik und Ergebnisse für das Jahr 2018," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(04), pages 44-52, February.
    5. Andreas Benedictow & Pål Boug, 2014. "Calculating the real return of the Norwegian Government Pension Fund Global by alternative measures of the deflator," Discussion Papers 775, Statistics Norway, Research Department.
    6. Constantin Anghelache & Cristina SACALÃ, 2016. "The analysis of correlation between the GDP and the Gross Income," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(9), pages 88-93, September.
    7. Axel Pierru and Walid Matar, 2014. "The Impact of Oil Price Volatility on Welfare in the Kingdom of Saudi Arabia: Implications for Public Investment Decision-making," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    8. Peter Sheehan & Robert G. Gregory, 2013. "The Resources Boom and Economic Policy in the Long Run," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 46(2), pages 121-139, June.
    9. Constantin Anghelache & Cristina SACALÃ, 2016. "Multiple linear regression used to analyse the corelation between GDP and some variables," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(9), pages 94-99, September.
    10. Ulrich Kohli, 2022. "Trading Gains and Productivity: A Törnqvist Approach," International Productivity Monitor, Centre for the Study of Living Standards, vol. 42, pages 63-86, Spring.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gregory, Robert G., 2012. "Living standards, terms of trade and foreign ownership: reflections on the Australian mining boom," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(2), pages 1-30.
    2. Rodrigo Suescún M., 1997. "Commodity booms,dutch disease,and real business cycles in a small open economy: The case of coffee in Colombia," Borradores de Economia 2164, Banco de la Republica.
    3. Phillip Edmund Metaxas & Ernst Juerg Weber, 2016. "An Australian Contribution to International Trade Theory: The Dependent Economy Model," The Economic Record, The Economic Society of Australia, vol. 92(298), pages 464-497, September.
    4. Neil Dias Karunaratne, 2013. "The mining boom, productivity conundrum and monetary policy design to combat resource curse effects in Australia," Discussion Papers Series 504, School of Economics, University of Queensland, Australia.
    5. Serpil Bouza & Stephen J. Turnovsky, 2012. "The Effects of Foreign Transfers with Flexible Labor Supply," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 1(1), pages 1-39, January.
    6. Shehabi, Manal, 2020. "Diversification effects of energy subsidy reform in oil exporters: Illustrations from Kuwait," Energy Policy, Elsevier, vol. 138(C).
    7. Pilar Poncela & Eva Senra & Lya Paola Sierra, 2017. "Long-term links between raw materials prices, real exchange rate and relative de-industrialization in a commodity-dependent economy: empirical evidence of “Dutch disease” in Colombia," Empirical Economics, Springer, vol. 52(2), pages 777-798, March.
    8. Andrés Felipe Arias & Hernando Zuleta, 1997. "Tasa de Cambio Real e Inversión. La Experiencia de 1990-1996," Borradores de Economia 076, Banco de la Republica de Colombia.
    9. Swift, Robyn, 2004. "Exchange rate changes and endogenous terms of trade effects in a small open economy," Journal of Macroeconomics, Elsevier, vol. 26(4), pages 737-745, December.
    10. Ben Naceur, Sami & Bakardzhieva, Damyana & Kamar, Bassem, 2012. "Disaggregated Capital Flows and Developing Countries’ Competitiveness," World Development, Elsevier, vol. 40(2), pages 223-237.
    11. Rodrigo Suescún M., 1997. "Commodity Booms, Dutch Disease, and Real Business Cycles in a Small Economy: The Case of Coffe in Colombia," Borradores de Economia 073, Banco de la Republica de Colombia.
    12. Ariel Burstein & Martin Eichenbaum & Sergio Rebelo, 2005. "Large Devaluations and the Real Exchange Rate," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 742-784, August.
    13. repec:phd:pjdevt:jpd_1990_vol__xvii_no__2-d is not listed on IDEAS
    14. Shashank Goel & V. Raveendra Saradhi, 2015. "Capital Flow Components and the Real Exchange Rate: Implications for India," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 14(2), pages 179-194, December.
    15. Macdonald, Ryan, 2007. "Real GDP and the Purchasing Power of Provincial Output," Economic Analysis (EA) Research Paper Series 2007046e, Statistics Canada, Analytical Studies Branch.
    16. Corbo, Vittorio & Fischer, Stanley, 1995. "Structural adjustment, stabilization and policy reform: Domestic and international finance," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 44, pages 2845-2924, Elsevier.
    17. Peter Warr, 2006. "The Gregory Thesis Visits the Tropics," The Economic Record, The Economic Society of Australia, vol. 82(257), pages 177-194, June.
    18. Michael Mussa, 1985. "The Real Exchange Rate as a Tool of Commercial Policy," NBER Working Papers 1577, National Bureau of Economic Research, Inc.
    19. Astorga, Pablo, 2007. "Real exchange rates in Latin America : what does the 20th century reveal?," IFCS - Working Papers in Economic History.WH wp07-03, Universidad Carlos III de Madrid. Instituto Figuerola.
    20. repec:dau:papers:123456789/4066 is not listed on IDEAS
    21. Bosupeng, Mpho, 2015. "The Export-Led Growth Hypothesis: New Evidence and Implications," MPRA Paper 77917, University Library of Munich, Germany, revised Jun 2015.
    22. Macdonald, Ryan, 2007. "Not Dutch Disease, It's China Syndrome," Insights on the Canadian Economy 2007017e, Statistics Canada, Economic Analysis Division.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:revinw:v:56:y:2010:i:3:p:498-518. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/iariwea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.