Consistent Level Aggregation and Growth Decomposition of Real GDP

• 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/52; https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1069&context=res_aki
• Institution: De La Salle University

This paper formulates a general framework for consistent level aggregation and growth decomposition of real GDP. However, the focus is on US GDP in chained prices based on the Fisher index since this GDP motivated this paper’s purposes. These are to explain why problematic residuals‒in contributions to US GDP level and growth “not allocated by industry”‒ show up in the existing framework by the Bureau of Economic Analysis and, therefore, to propose an alternative framework for consistent level aggregation and growth decomposition where residuals cannot arise. This paper’s residual-free framework applies to real GDP regardless of the underlying indexes, i.e., to GDP either in chained prices or in constant prices.