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Decomposition of GDP Growth in Some European Countries and the United States

  • Henk Kranendonk

    ()

  • Johan Verbruggen

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.

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File URL: http://hdl.handle.net/10.1007/s10645-008-9095-0
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Article provided by Springer in its journal De Economist.

Volume (Year): 156 (2008)
Issue (Month): 3 (September)
Pages: 295-306

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Handle: RePEc:kap:decono:v:156:y:2008:i:3:p:295-306
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100260

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  1. Henk Kranendonk & Johan Verbruggen, 2008. "Decomposition of GDP-growth in some European Countries and the United States," CPB Memorandum 203, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Martin Mellens & Herman Noordman & Johan Verbruggen, 2007. "Re-exports: international comparison and implications for performance indicators," CPB Document 149, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Henk Kranendonk & Johan Verbruggen, 2005. "How to determine the contributions of domestic demand and exports to economic growth?," CPB Memorandum 129, CPB Netherlands Bureau for Economic Policy Analysis.
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