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A Comparison of the Rates of Growth of Post-Transformation Economies: What Can(Not) Be Expected From GDP?

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  • Miroslav Singer

Abstract

This paper suggests that real GDP is not an appropriate indicator for long-term comparisons of the performance of transformation and post-transformation economies either with developed economies, or one with another, or across different phases of development of a single economy. We analyse the possible reasons why real GDP diverges from the theoretical concept of the objective level of value added adjusted for inflation. These reasons concern real exchange rate appreciation and overestimation of inflation due to quality changes in output after the collapse of central planning. To overcome the shortcomings of real GDP in explaining the true "transformation story" we develop the concept of "comparable" real GDP. This concept is calculated from nominal GDP, the exchange rate against the euro, and inflation in the euro area. While the differences between "standard" real GDP and "comparable" real GDP are modest and temporary in advanced economies, they are quantitatively and qualitatively significant and persistent in transformation and post-transformation economies. On the basis of the relevant literature we introduce two modifications of "comparable" real GDP. They account for likely differences in productivity patterns between tradables and non-tradables and between the performance of the export and non-export segments of the economy respectively. We conclude that true convergence is proceeding at a significantly higher pace than real GDP implies and that the Czech economy is converging to the euro area somewhat faster than the Polish economy and much faster than the Hungarian economy.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2013 (2013)
Issue (Month): 1 ()
Pages: 3-27

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Handle: RePEc:prg:jnlpep:v:2013:y:2013:i:1:id:438:p:3-27

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Related research

Keywords: transition economies; real GDP; real convergence; GDP- and inflation mis-measurements; economic growth;

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References

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  1. Sfreddo, Claudio, 2004. "Growth in Switzerland: is the picture really that gloomy?," MPRA Paper 4679, University Library of Munich, Germany.
  2. Brada, Josef C. & King, Arthur E. & Kutan, Ali M., 2000. "Inflation bias and productivity shocks in transition economies: The case of the Czech Republic," ZEI Working Papers B 02-2000, ZEI - Center for European Integration Studies, University of Bonn.
  3. Vladislav Flek & Lenka Marková & Jiøí Podpiera, 2003. "Sectoral Productivity and Real Exchange Rate Appreciation: Much Ado about Nothing?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 53(3-4), pages 130-153, March.
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Cited by:
  1. Jaromir Baxa & Michal Franta & Tomas Havranek & Roman Horvath & Miroslav Plasil & Marek Rusnak & Borek Vasicek, 2013. "Transmission of Monetary Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 11, number rb11/1 edited by Jan Babecky & Roman Horvath, August.
  2. Kamil Galuscak & Adam Gersl & Marcela Gronychova & Petr Hlavac & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Tomas Konecny & Jakub Seidler, 2014. "Stress-Testing Analyses of the Czech Financial System," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 1, volume 12, number rb12/1 edited by Jan Babecky & Roman Horvath, August.
  3. Robert Ambrisko & Vitezslav Augusta & Jan Babecky & Michal Franta & Dana Hajkova & Petr Kral & Jan Libich & Pavla Netusilova & Milan Rikovsky & Jakub Rysanek & Pavel Soukup & Petr Stehlik & Vilem Vale, 2013. "Macroeconomic Effects of Fiscal Policy," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, edition 2, volume 11, number rb11/2 edited by Jan Babecky & Kamil Galuscak, August.

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