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Terms of trade, real GDP, and real value added: A new look at New Zealand's growth performance

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  • Ulrich Kohli

Abstract

The conventional measure of real GDP underestimates the growth in real value added when the terms of trade improve. Thus, in New Zealand, where the terms of trade have been improving over the past 15 years, real GDP has underestimated the country's real growth performance by nearly 0.4% per year on average. Our analysis has a solid theoretical foundation, being based on the GDP-function approach to modelling the production sector of an open economy.

Suggested Citation

  • Ulrich Kohli, 2003. "Terms of trade, real GDP, and real value added: A new look at New Zealand's growth performance," New Zealand Economic Papers, Taylor & Francis Journals, vol. 37(1), pages 41-66.
  • Handle: RePEc:taf:nzecpp:v:37:y:2003:i:1:p:41-66 DOI: 10.1080/00779950309544378
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    References listed on IDEAS

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    Cited by:

    1. Buckle, Robert A. & Kim, Kunhong & Kirkham, Heather & McLellan, Nathan & Sharma, Jarad, 2007. "A structural VAR business cycle model for a volatile small open economy," Economic Modelling, Elsevier, vol. 24(6), pages 990-1017, November.

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