Prague Economic Papers 2013, 22(1):3-27 | DOI: 10.18267/j.pep.438

A Comparison of the Rates of Growth of Post-Transformation Economies: What Can(Not) Be Expected From GDP?

Miroslav Singer
Czech National Bank, Na Příkopě 28, CZ - 115 03 Praha 1 (miroslav.singer@cnb.cz).

This paper suggests that real GDP is not an appropriate indicator for long-term comparisons of the performance of transformation and post-transformation economies either with developed economies, or one with another, or across different phases of development of a single economy. We analyse the possible reasons why real GDP diverges from the theoretical concept of the objective level of value added adjusted for inflation. These reasons concern real exchange rate appreciation and overestimation of inflation due to quality changes in output after the collapse of central planning. To overcome the shortcomings of real GDP in explaining the true "transformation story" we develop the concept of "comparable" real GDP. This concept is calculated from nominal GDP, the exchange rate against the euro, and inflation in the euro area. While the differences between "standard" real GDP and "comparable" real GDP are modest and temporary in advanced economies, they are quantitatively and qualitatively significant and persistent in transformation and post-transformation economies. On the basis of the relevant literature we introduce two modifications of "comparable" real GDP. They account for likely differences in productivity patterns between tradables and non-tradables and between the performance of the export and non-export segments of the economy respectively. We conclude that true convergence is proceeding at a significantly higher pace than real GDP implies and that the Czech economy is converging to the euro area somewhat faster than the Polish economy and much faster than the Hungarian economy.

Keywords: economic growth, transition economies, real convergence, real GDP, GDP- and inflation mis-measurements
JEL classification: N10, O11, O47, O52, O57, P52

Published: January 1, 2013  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Singer, M. (2013). A Comparison of the Rates of Growth of Post-Transformation Economies: What Can(Not) Be Expected From GDP? Prague Economic Papers, 22(1), 3-27. doi: 10.18267/j.pep.438
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Benáček, V. (2004), "Král není nahý", Ekonom, No. 31, 29 July 2004, pp. 32-34.
    2. Benáček, V. (2005), "Konkurenční schopnost české ekonomiky: současný stav a možnosti jejího posilování", CESES Working Paper, FSV, Univ. Karlova, 2005.
    3. Brada, C. J., King, E. A., Kutan, M. A. (2000a), "Inflation Bias and Productivity Shocks in Transition Economies: The Case of the Czech Republic", Economic Systems, Vol. 24, No. 2, pp. 119-138. Go to original source...
    4. Brada, C. J., King, E. A., Kutan, M. A. (2000b), "More on Inflation, Productivity and Output in Transition", Economic Systems, Vol. 24, No. 3 (September 2000), pp. 295-300. Go to original source...
    5. ČNB (2004), "Reálný HDP a vliv změny směnných relací", mimeo.
    6. Filer, K. R., Hanousek, J. (2000), "Output Changes and Inflationary Bias in Transition", Economic Systems, Vol. 24, No. 3 (September 2000). Go to original source...
    7. Filer, K. R., Hanousek, J. (2003), "Inflationary Bias in Mid to Late Transition Czech Republic", Economic Systems, 27, pp. 367-376. Go to original source...
    8. Flek, V., Marková, L., Podpiera, J. (2002), "Sectoral Productivity and Real Exchange Rate Appreciation: Much Ado about Nothing?", CNB Working Paper 4.
    9. Hanousek, J., Filer, K. R. (2002), "Evaluating Imperfection and Biases in Price Indexes during Transition", CERGE-EI, mimeo.
    10. Hanousek, J., Filer, K. R. (2004a), "Consumers' Opinion of Inflation Bias due to Quality Improvements in Transition in the Czech Republic", Economic Development and Cultural Change, Vol. 53, No. 1, pp. 235-254. Go to original source...
    11. Hanousek, J., Filer, K. R. (2004b), "Substitution Biases in Price Indexes During Transition", Statistical Journal, Vol. 21, No. 2, pp. 153-163. Go to original source...
    12. Kohli, U. (2003a), "Terms of Trade, Real GDP, and Real Value Added: A New Look at New Zealand's Growth Performance", Swiss National Bank, May 2003, mimeo. Go to original source...
    13. Kohli, U. (2003b), "Real GDP, Real Domestic Income, and Terms-of-Trade Changes", Journal of International Economics, Vol. 62 (2004), pp. 83-106. Go to original source...
    14. Kohli, U. (2006), "Terms-of-Trade Changes, Real GDP, and Real Value Added in the Open Economy: Reassessing Hong Kong's Growth Performance", Swiss National Bank, March 2006, mimeo. Go to original source...
    15. Kubíček, J., Tomšík, V. (2004a), "Kouzlo směnných relací aneb jak přepočítat HDP", Ekonom, No. 34, 19 August 2004, pp. 44-45.
    16. Kubíček, J., Tomšík, V. (2004b), "Král není nahý, ale ani bohatý", Ekonom, No. 34, 19 August 2004, pp. 46-47.
    17. Lommatzsch, K. (2004), "Jak přepočítat HDP", Ekonom, No. 31, 29 July 2004, pp. 30-32
    18. Sfreddo, C. (2004), "Growth in Switzerland: Is the Picture Really that Gloomy?", Institut CREA de macroéconomie appliqué, October 2004, mimeo.
    19. Spěváček, V. (2005), "Ekonomický růst České republiky ve světle ukazatelů reálného důchodu", Working Paper CES VŠEM No 2/2005, Centrum ekonomických studií VŠEM.
    20. Švejnar, J. (2002), "Transition Economies: Performance and Challenges", Journal of Economic Perspectives, Vol. 16, No. 1, pp. 3-28. Go to original source...
    21. Vintrová, R. (2005), "Co neodhaluje HDP při analýze ekonomického růstu a reálné konvergence", Working Paper CES VŠEM No 1/2005, Centrum ekonomických studií VŠEM.

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License (CC BY NC ND 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content