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Measuring Economic Growth with a Fully Identified Three-Signal Model

Author

Listed:
  • Andrea Civelli
  • Arya Gaduh
  • Ahmed Sadek Yousuf

Abstract

We augment Henderson et al. (2012)’s two-signal model of true GDP growth with a third signal to overcome its under-identification problem. The additional moment conditions from the third signal help fully identify all model parameters without ad-hoc calibrations of the GDP’s signal-to-noise ratio. We characterize the necessary properties of the third signal. Using the model, we recover the optimal weight of official GDP in the composite true GDP growth estimates, which varies with the quality of the national statistics. The model improves on existing methodologies that use signals to measure true income.

Suggested Citation

  • Andrea Civelli & Arya Gaduh & Ahmed Sadek Yousuf, 2023. "Measuring Economic Growth with a Fully Identified Three-Signal Model," NBER Working Papers 31517, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:31517
    Note: DEV EFG
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    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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