An Alternative Framework for Sectoral Contributions to GDP Level and Growth: Application to the Philippines

• Main Author: Dumagan, Jesus C.
• Format: text
• Published: Animo Repository 2014
• Subjects: Real GDP; relative prices; index numbers; aggregation; additivity; Growth and Development
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/53; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1068&context=res_aki
• Institution: De La Salle University

This paper applies relative price weights–where relative price is the ratio of a sector’s GDP deflator to the aggregate GDP deflator–to convert sectoral real GDP to homogeneous units using the economy’s GDP as “numeraire” in an alternative framework for GDP level aggregation and growth decomposition. This alternative and the “traditional” framework–without relative price weights–are compared and applied to Philippine GDP to show that the latter framework is deficient and misleading for its inability to determine the effects on GDP growth of changes and differences in sectoral relative prices that need to be taken into account.