Working Paper: NBER ID: w10866
Authors: Robert C. Feenstra; Alan Heston; Marcel P. Timmer; Haiyan Deng
Abstract: In this paper we propose a new approach to international comparisons of real GDP measured from the output-side. The traditional Geary-Khamis system to measure real GDP from the expenditure-side is modified to include differences in the terms of trade between countries. It is shown that this system has a strictly positive solution under mild assumptions. On the basis of a set of domestic final output, import and export prices and values for 14 European countries and the U.S. it is shown that differences between real GDP measured from the expenditure and output-side can be substantial, especially for small open economies.
Keywords: real GDP; international comparisons; terms of trade; Penn World Tables
JEL Codes: F41; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real GDP from the output side (real GDP_o) (O40) | real GDP from the expenditure side (real GDP_e) (E20) |
| terms of trade (F14) | real GDP from the output side (real GDP_o) (O40) |
| terms of trade (F14) | real GDP from the expenditure side (real GDP_e) (E20) |
| real GDP from the output side (real GDP_o) (O40) | terms of trade (F14) |
| real GDP from the expenditure side (real GDP_e) (E20) | net foreign balances (F30) |