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An Implicit Törnqvist Index of Real GDP

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  • Ulrich Kohli

Abstract

Recently much attention has been devoted to superlative indexes in the context of the national accounts. In this paper we advocate the use of the implicit Törnqvist quantity index to measure real GDP. This index, which has been proposed by Diewert and Morrison (1986), has never received serious consideration in the literature. Yet, compared to the better-known Fisher index, the implicit Törnqvist index of real GDP has a number of advantages. Thus, it can be shown to be exact for the Translog GDP function, it allows for a complete multiplicative decomposition of nominal and real GDP, and it is consistent with state-of-the-art measures of total factor productivity that typically rely on the Törnqvist aggregation. Estimates for a sample of 26 countries are reported. We find that the Laspeyres quantity index still used by the statistical agencies of most countries tends to underestimate real growth. Over the 1960–1996 period, the cumulated shortfall was as much as 13.4% of GDP in the case of Japan. Copyright Kluwer Academic Publishers 2004

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  • Ulrich Kohli, 2004. "An Implicit Törnqvist Index of Real GDP," Journal of Productivity Analysis, Springer, vol. 21(3), pages 337-353, May.
    • Handle: RePEc:kap:jproda:v:21:y:2004:i:3:p:337-353
    DOI: 10.1023/B:PROD.0000022097.34038.ad
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    1. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
    2. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    3. R. G. D. Allen, 1975. "Index Numbers in Theory and Practice," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-02312-7, October.
    4. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    5. Christensen, Laurits R. & Cummings, Dianne, 1981. "Real product, real factor input, and productivity in the Republic of Korea, 1960-1973," Journal of Development Economics, Elsevier, vol. 8(3), pages 285-302, June.
    6. Ulrich R. Kohli, 1978. "A Gross National Product Function and the Derived Demand for Imports and Supply of Exports," Canadian Journal of Economics, Canadian Economics Association, vol. 11(2), pages 167-182, May.
    7. Ulrich Kohli, 2003. "GDP Growth Accounting: A National Income Function Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 49(1), pages 23-34, March.
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    Cited by:

    1. 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.
    2. Chihiro Shimizu & Erwin Diewert & Koji Nomura, 2023. "Improving the SNA: Alternative Measures of Output, Input, Income and Productivity for China," Working Papers e178, Tokyo Center for Economic Research.
    3. Argentiero, Amedeo & Cerqueti, Roy & Sabatini, Fabio, 2021. "Does social capital explain the Solow residual? A DSGE approach," Structural Change and Economic Dynamics, Elsevier, vol. 58(C), pages 35-53.
    4. Barbara Doebeli & Marcin Kolasa, 2005. "Rola zmian cen dóbr handlowych we wzroście dochodu krajowego Polski, Czech i Węgier," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 25-45.
    5. Wolfgang Nierhaus, 2016. "Vierteljährlicher Realwert des BIP: Aktuelle Ergebnisse," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(15), pages 34-37, August.
    6. Diewert, Erwin & Fox, Kevin J., 2019. "Productivity Indexes and National Statistics: Theory, Methods and Challenges," Microeconomics.ca working papers erwin_diewert-2019-8, Vancouver School of Economics, revised 25 Apr 2019.
    7. Diewert, Erwin, 2008. "Changes in the Terms of Trade and Canada's Productivity Performance," Economics working papers diewert-08-03-11-11-03-49, Vancouver School of Economics, revised 18 Jul 2008.
    8. Diewert, Erwin & Mizobuchi, Hideyuki, 2009. "An Economic Approach to the Measurement of Productivity Growth Using Differences Instead of Ratios," Economics working papers erwin_diewert-2009-2, Vancouver School of Economics, revised 09 Jan 2009.
    9. Wolfgang Nierhaus, 2014. "Realwert des BIP: Kaufkraftplus durch Terms-of-Trade-Gewinne," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(14), pages 27-30, July.
    10. Wolfgang Nierhaus, 2016. "Realwert des Bruttoinlandsprodukts und Terms of Trade: Ergebnisse für 2015," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 69(04), pages 60-64, February.
    11. Dovern, Jonas & Meier, Carsten-Patrick, 2006. "Macroeconomic aspects of structural labor market reforms in Germany," Kiel Working Papers 1295, Kiel Institute for the World Economy (IfW Kiel).
    12. Wolfgang Nierhaus, 2015. "Realwert des Bruttoinlandsprodukts und Terms of Trade: Ergebnisse für 2014," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 68(03), pages 36-40, February.
    13. Wolfgang Nierhaus, 2017. "Realwert des Bruttoinlandsprodukts und Terms of Trade: Ergebnisse für das Jahr 2016," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(03), pages 46-50, February.

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