Real GDP, Real GDI, and Trading Gains: Canada,

Transcription

1 Real GD, Real GDI, and Trading Gains: Canada, Ulrich Kohli 1 Swiss Naional Bank ABSTRACT Real gross domesic produc (GD) fails o accoun for he rading gains and losses ha resul from changes in he erms of rade and in he real exchange rae (he price of radables relaive o he price of nonradables) Canada has enjoyed vas improvemens in is erms of rade over recen years and here is a growing suspicion ha real GD has done an inadequae job a reflecing he resuling increases in real value added and real gross domesic income (GDI) Superlaive measures of he erms of rade and real exchange rae effecs confirm his view, wih he rading gains adding up o 48 per cen of GD beween 00 and 005 CANADA HAS EXERIENCED SUBSTANTIAL improvemens in is erms of rade over he pas few years As esablished by inernaional rade heory, an improvemen in he erms of rade, oher hings equal, is income and welfare enhancing There is a growing suspicion, however, in Canada and elsewhere, ha real gross domesic produc (GD) does an inadequae job a capuring his increase in real value added The following quoe is quie represenaive: [] some economiss ake he view ha official GD daa have significanly undersaed Canada s growh rae over he pas hree years by no aking accoun of he vas improvemen, unil he pas monh or wo, in he erms of rade, Bernard Simon in he Financial Times, July 1, 006 As argued by Diewer and Morrison (1986) in a seminal aricle, an improvemen in he erms of rade is similar o echnological progress The counry essenially ges more for less Ye, unlike a echnological advance, a erms of rade improvemen is reaed by he naional accouns as a price phenomenon, raher han as a real developmen An increase in expor prices or a drop in impor prices, for insance, will no only end o increase nominal GD, bu i will also raise he GD deflaor, leaving real GD lile changed, even hough real value added and real income mus unambiguously have increased 3 Canada is no an isolaed case Ausralia, on he wave of a massive increase in commodiy prices in recen years, has been facing a similar 1 Alernae member of he Governing Board and Chief Economis, Swiss Naional Bank I am graeful o Erwin Diewer, ierre Duguay, Andrew Sharpe, and wo anonymous referees for heir commens They are obviously no responsible for any errors or omissions UlrichKohli@snbch Thus, he expor price index increased by 34 per cen beween 00 and 005, whereas he impor price index fell by 98 per cen over he same ime span 3 In fac, as shown by Kohli (1983, 004a), an improvemen in he erms of rade will end o reduce real GD if i is measured by a Laspeyres quaniy index Alhough his remark does no apply o Canada which has moved o a superlaive index o measure real GD, mos counries oday sill use he Laspeyres funcional form, wheher chained or unchained 46 N UMBER 13, FALL 006

2 siuaion Somehow here is he feeling ha official real GD figures do no ruly reflec he income and purchasing power gains ha he counry has enjoyed In a special aricle released wih yeserday's naional accouns, he Saisician explained ha he very srong growh in Ausralia's erms of rade mean he sandard measures of GD, which don' capure his, appeared o undersae he rue level of economic aciviy, Alan Wood in The Ausralian, March 8, 005 No all examples are naural resources relaed Swizerland, over he course of he pas quarer of a cenury, has experienced a subsanial improvemen in is erms of rade in he viciniy of 30 per cen leading some observers o argue ha he growh of real value added had been underesimaed by real GD by close o half a percenage poin annually, and ha he growh pessimism ha has developed in ha counry over ime was herefore no fully jusified 4 Much of inernaional economic heory models rade as aking place in finished producs, and hus occurring afer producion This view is somewha misleading Indeed, mos rade is in inermediae producs, and even mos so-called finished goods ha are raded are no ready o mee final demand Jus abou all impored "finished" producs mus sill ransi hrough he domesic producion secor where hey are subjec o a number of ransformaions (handling, ransporaion, insurance, repackaging, reailing, and so on) In his process, hey are combined wih domesic facor services, so ha a significan proporion of he final price ag is ypically accouned for by domesic value added Similarly, expors are no ready o mee final demand eiher, as hey mus sill flow hrough he foreign producion secor and go hrough a number of changes They are hus concepually differen from goods and services inended for domesic absorpion In ha sense, nearly all raded goods are inermediae goods or middle producs 5 By he same logic, all goods inended for domesic use can be viewed as nonraded goods In ruh, inernaional rade is an inimae par of producion Trade is jus anoher way by which some goods can be ransformed ino oher goods I should make lile difference o economiss wheher producs are ransformed ino ohers hrough a physical process, hrough a chemical reacion, or hrough rade If he erms of his ransformaion become more favourable, i should no maer wheher his is he resul of a echnological advance or wheher i is due o beer exchange condiions Alhough we view improvemens in he erms of rade as a poenially significan source of income growh, his in no way negaes he imporance of he oher deerminans of real growh, namely increases in work effor, he accumulaion of capial, improvemens in oal facor produciviy (TF), and ne income received from abroad Indeed, he empirical evidence suggess ha in he long run growh is mosly condiioned by increases in he capial sock and by gains in TF Changes in he erms of rade play quaniaively a much smaller role in mos cases, bu for he sake of good measuremen, hey mus noneheless be aken ino accoun when assessing a counry's economic performance We should also emphasize ha rade iself, beyond allowing for he ransformaion of some goods ino ohers and hus being a source of welfare gains, is likely o have an indirec impac hroughou much of he home economy By exposing domesic producers o foreign compeiion and forcing hem o coninuously innovae, rade is an imporan caalys of growh 4 See Kohli (004a, 005), and The Economis, February 14, See Burgess (1974) and Kohli (1978, 1991) The erm "middle producs" has been coined by Sanyal and Jones (198) I NTERNATIONAL RODUCTIVITY MONITOR 47

3 This posiive fallou will ypically be capured by increased TF This aricle does no address his quesion, however, since i is fully devoed o measuremen issues and i does no aemp o explain he causes of TF growh or of erms of rade improvemens There is lile doub hough ha even if some of hese improvemens may be exogenous (he same applies o echnological advances), many of hem are endogenous, and he resul of research and markeing aciviies ha require he mobilizaion of domesic resources While a change in he erms of rade does have real effecs, here is anoher price raio, namely he price of raded vs nonraded goods, ha is prone o rigger welfare effecs and ha has been largely ignored in he curren debae This price raio is ofen hough of as a measure of he real exchange rae 6 An increase in he price of raded goods vs nonraded goods (a real depreciaion of he domesic currency, for given erms of rade) increases expor revenues and raises he impor bill Which effec will dominae depends on he sign of he rade balance If he rade accoun is in a defici posiion, he laer will exceed he former, and he counry will experiences a fall in is real income 7 This oucome conrass wih he convenional wisdom ha a real depreciaion ends o have a posiive effec on real GD because i makes expors relaively more compeiive and foreign producs relaively less aracive This is very much a Keynesian, demand side view, whereas he approach followed here is decisively neoclassical and i is fully consisen wih he small open economy assumpion frequenly invoked in inernaional rade heory These wo sources of gains pu ogeher form wha is someimes called he rading gains or losses and hey explain he difference beween real GD and real gross domesic income (GDI) 8 As shown in his aricle, he rading gains really consis of wo separae componens: he erms of rade gains and he real exchange rae gains 9 Empirical esimaes, based on he Törnqvis aggregaion, show ha Canada has indeed benefied handsomely from he improvemen in is erms of rade ha has occurred beween 00 and 005 A he same ime i has experienced a small income loss on accoun of real exchange rae developmens Convenional Measures of he Trading Gains Much of he lieraure on he rading gains is based on he Laspeyres aggregaion, so his is a naural saring poin for our analysis 10 Real GD is ypically compued as a direc Laspeyres quaniy index by simply adding up he consan dollar GD componens Naional accounans 6 See Saler (1959), Dornbusch (1980), Frenkel and Mussa (1984), Corden (199), and he lieraure on wha has become known as he Ausralian model Noe ha he real exchange rae so defined does no coincide exacly wih anoher common definiion of he real exchange rae (someimes called he real exchange rae), namely he nominal exchange rae adjused for inflaion rae differenials; see Edwards (1989) for a review of compeing definiions of he real exchange rae and he Appendix for a furher discussion 7 For simpliciy we absrac from facor income flows o and from abroad Oherwise i would be he posiion of he curren accoun ha would be relevan, raher han ha of he rade accoun, and one would have o focus on GN and GNI, raher han on GD and GDI 8 The rading gains capure he income increase resuling from changes in he erms of rade and he real exchange rae beween wo periods of ime This is no o be confused wih he gains from rade, which measures he welfare gains resuling from inernaional rade saring from a closed economy siuaion 9 The erms of rade and he real exchange rae are someimes used inerchangeably, bu hey are really wo disinc conceps Alhough i is rue ha here may be a one-o-one relaionship beween he wo variables in he Mundell (1963)-Fleming (196) macroeconomic model (unless ases happen o be he same a home and abroad, in which case he real exchange rae is consan), his is generally no so if he number of goods exceeds wo; see he Appendix for deails 10 See Unied Naions (00), Secions , for insance Canada currenly uses he Fisher aggregaion The case of so-called superlaive indexes will be examined in he nex secion 48 N UMBER 13, FALL 006

4 have long recognized ha his procedure which involves adding expors and subracing impors valued a heir base period prices fails o ake ino accoun he income gain or loss due o changes in he erms of rade A number of correcive measures have herefore been proposed They ypically enail deflaing nominal expors and nominal impors by he same price index Addiion of he resuling erms hen yields real GDI, and he difference beween real GDI and real GD is inerpreed as he rading gains A number of differen price indexes have been proposed in he lieraure o deflae nominal ne expors and impors We will review he four mos common choices The price of impors Deflaing ne expors by he price of impors amouns o reaining he purchasing power of expors raher han heir volume when adding up he GD componens o ge real GDI This procedure is essenially he one used by he US Bureau of Economic Analysis when compuing Command Basis G or by he Ausralian Bureau of Saisics when compuing real GDI 11 The price of expors One can argue ha one could equally well use he price of expors as he common deflaor This would mean ha i is he cos of impors in erms of expors, raher han heir volume, ha eners he real GDI calculaion The price of raded goods A hird possibiliy, endorsed by Eurosa, 1 is o deflae he rade accoun by he arihmeic mean of he expor and impor price indexes, which can be inerpreed as he price of raded goods The price of domesic expendiures This amouns o deflaing he income generaed by he rade balance by he price of wha i will evenually be used for, ie o pay for domesic absorpion Of he four proposed soluions i is he las one ha we prefer, mosly for wo reasons 13 Firs, one can show ha he GDI price deflaor, which is defined as nominal GD divided by real GDI, is hen simply equal o he price of domesic expendiures 14 No only is his a very inuiive resul, bu i also means ha real GDI can be obained direcly by deflaing nominal GD by he price of domesic expendiures 15 The implici GDI deflaors for he oher hree proposed soluions, on he oher hand, urn ou o be raher complex and opaque expressions Second, he measures of he rading gains and of real GDI are independen of he posiion of he rade accoun if he price of domesic expendiures is used, which is no rue in he hree oher cases In our opinion, i is imporan ha he measure of real income be independen of he savings/absorpion decision Noneheless, all measures of he rading gains discussed here (including he fourh one) suffer from a number of drawbacks Thus, hey are derived in absolue (consan dollar) erms This makes i raher difficul o assess heir rue imporance (hus, in 005, he Canadian rading gains amouned o $473 billion dollars a 1997 prices if he price of domesic expendiures is used as he deflaor) Admiedly, i would be a simple maer o express hem in percenage erms, relaive o he curren value of real GD, for insance More damaging hough, is he fac ha he very value of he rading gains reflecs he choice of he base 11 See Denison (1981), and Ausralian Bureau of Saisics (004) 1 See European Union (1996), Chaper The use of he price of domesic demand as he deflaor is also advocaed by Duguay (006) 14 We ake i, from he naional accouns ideniy, ha nominal GD is equal o nominal GDI 15 Ye anoher possibiliy would be o deflae nominal GD by he price of consumpion expendiures This would inroduce an addiional relaive price effec ino he analysis, namely he one involving he price of consumpion relaive o oal domesic expendiures; see Diewer and Lawrence (006) for deails I NTERNATIONAL RODUCTIVITY MONITOR 49

5 period (1997 in he above example), since hey are defined wih reference o ha period (he rading gains and losses are necessarily nil in he base period) In wha follows we will herefore op for a chained measure o ge around ha difficuly since he reference period is hen consanly updaed Moreover, we will move o a superlaive index number approach such as he one already in use in Canada 16 A Törnqvis Index of he Trading Gains Canada has recenly adoped he Fisher index for he measuremen of real GD In wha follows, we will use a superlaive measure oo, bu we will op for he Törnqvis index, raher han he Fisher index This choice is dicaed by convenience, since we find he Törnqvis aggregaion more racable In any case, as documened by many sudies, he numerical differences compared o he Fisher aggregaion should be very small 17 I should also be noed ha many counries, including Canada, now use chained indexes, raher han direc (or fixed based) indexes Our reamen will herefore also be se up in erms of chained indexes Each chain elemen is defined as a growh facor, ie i is equal o one plus he rae of growh of he corresponding variable beween period -1 and period Le V be he growh facor of nominal GD Y, (hus, i is he raio of nominal GD a ime over is value one period earlier) To simplify maers we assume ha all domesic GD componens can be consisenly aggregaed ino a nonraded good, wih price We compue N, as a Törnqvis index of he prices of consumpion, invesmen, and governmen pur- N, chases Le be he GD price deflaor I Y, oo is compued as a Törnqvis price index, of he prices of nonraded goods, impors, and expors We now can define Q as he implici Törnqvis index of real GD: Y, 18 V (1) Y, Q, Y, Y, and Q as he implici Törnqvis index of real Z, GDI: 19 V () Y, Q Z, N, The difference beween Q and concerns he price index ha is used o deflae nom- Y, Q Z, inal GD: he GD price index in one case and he domesic expendiures price index in he oher The raio of real GDI o real GD defines he rading gains facor ( ): (3) T Z, Y, T is greaer han one if he rading gain is posiive, and i is less han one if here is a rading loss I can immediaely be seen from (1) (3) ha can also be obained as: T (4) Y, T = Q Q Tha is, he rading gains facor can be measured by comparing he wo price indexes used o deflae nominal GD Wha is key here is ha T 16 A superlaive index is an index ha is exac for a flexible funcional form, ie, a funcional form ha provides a second-order approximaion o an arbirary aggregaor funcion (Diewer, 1976) The main advanage of superlaive indexes is ha heir quadraic naure enables hem o beer accoun for subsiuion effecs ha resul from changes in relaive prices and/or quaniies The so-called subsiuion bias inheren o linear index number formulas is hus reduced, or even eliminaed The bes known superlaive indexes are he Fisher and he Törnqvis The Fisher index is given by he square roo of a Laspeyres index and a aasche index, which hemselves can be hough of as weighed arihmeic means of he disaggregaed growh facors, whereas he Tornqvis index can be viewed as a weighed geomeric mean of hese facors 17 See Diewer (1978), for insance 18 On his definiion, see Diewer and Morrison (1986) and Kohli (004b) 19 If he Fisher aggregaion is preferred, one could equally well deflae nominal GD by he Fisher price index of domesic expendiures 50 N UMBER 13, FALL 006

6 he prices of impors and expors are conained in, bu no in Terms of Trade and Real Exchange Rae Effecs Le and be he price indexes of X, M, expors and impors, respecively We define he price of raded goods ( ) as he geomeric T, mean of hese wo prices: (5) 1 / 1 / The price of raded goods in erms of nonraded goods ( ), herefore is: (6) S T, = X, M, Following he Ausralian model lieraure, we will refer o his price raio as he real exchange rae 0 As for he erms of rade ( H ), hey are defined as follows: (7) H X, One can show (Kohli, 006) ha wrien as: (8) = T T, where (9) Y, T, X, M, S M, T H, S, T H, ω + exp + 1 / can be is he real exchange rae effec; ω ( ω ) and X, X, 1 ( ω M ) denoe he GD shares of expors 1 ω M, 1 M, 1 / T ω + ω X, 1 ln H X, capures he erms of rade effec in he Törnqvis case, and ω + ω X, 1 X, (10) T S exp, ω + ω M, 1 M, ln S ω M,, 1 and impors a ime (-1) These wo effecs measure he impac on real GDI, oher hings equal, of a change in he erms of rade and in he real exchange rae, respecively To sum up, he following decomposiion of real GDI holds: (11) Q = Q T T,,,, Z Y H S We repor in Table 1 esimaes of,, Y Z T, T, and for Canada for he period H, T S, Geomeric means for he enire period and for seleced sub-periods are repored a he boom of he able Focusing on he enire period firs, one sees ha he rading gains effec has been slighly posiive, averaging abou 01 per cen per year This is also he difference beween he average annual growh raes of real GDI (8 per cen) and real GD (7 per cen) The rading gains effec is fully explained by he erms of rade effec; he real exchange rae effec was acually slighly negaive on average This negaive conribuion is explained by he fac ha he price of raded goods fell relaive o he price of nonraded goods over he period, which had a derimenal income effec given ha Canada's rade accoun was in a surplus posiion on average I is also apparen from Table 1 ha he rading gains effec is quie volaile I was as low as in 1998, hus shaving abou 16 per cen off real GDI growh, or as high as in 003, hus adding nearly per cen o he growh of real income In fac, he gain would have been even larger in 003 had i no been for a relaively significan negaive real exchange rae effec The divergence beween real GDI growh and real GD growh in individual years can bes be documened graphically This is done in Char 1 ha shows ha he discrepancies have indeed been subsanial a imes, paricularly so in recen years Q, Q, 0 See foonoe 6 above and he Appendix; Corden (199) also proposes he name "Saler raio 1 The daa are annual and hey are drawn from he Canadian naional accouns (May 31, 006 release) Thanks are due o Andrew Sharpe for providing me wih he daa I NTERNATIONAL RODUCTIVITY MONITOR 51

7 Table 1 Real GD, Real GDI, and Trading Gains for Canada (average annual growh facors) Real GD (Q Y, ) Real GDI (Q Z, ) Source: Naional Accouns, Saisics Canada, May 31, 006 Trading Gains (T ) TOT Effec (T H, ) ER Effec (T S, ) Reurning our aenion o Table 1 and looking a he sub-periods, we find ha he rading gains were small on average during he eighies and nineies Since he urn of he cenury, however, and paricularly so in he pas hree years, i is very clear ha real GD growh has subsanially underesimaed he growh in real income Thus, from 00 o 005, real GD has increased by a oal of 8 per cen, whereas real GDI increased by 134 per cen The cumulaed rading gains effec of 48 per cen over hese hree years can be decomposed ino a posiive erms of rade effec of 5 per cen and a negaive real exchange rae effec of 03 per cen These resuls sugges ha he view held by a number of Canadian economiss, as repored by he Financial Times and quoed in he inroducion, is indeed correc 5 N UMBER 13, FALL 006

8 Char 1 Real GD and real GDI in Canada (annual growh raes) Real GD Concluding Commens As he esimaes for Canada demonsrae, growh in real value added can deviae significanly from ha of real GD I is imporan ha his be kep in mind, no jus by economic researchers and analyss, bu also by policy makers By focusing exclusively on real GD, policy makers migh miss significan changes in he counry's spending poenial resuling from rading gains Because real GD focuses on domesic producion in a narrow sense, excluding he gains and losses generaed by erms of rade and real exchange rae movemens, we believe ha real GDI is a beer measure of real value added Noneheless, here are a number of oher imporan issues ha we have no covered in his Real GDI aricle Thus, when i comes o measuring income, one can argue ha nominal gross naional produc (GN) or income (GNI) are more relevan han GD or GDI, given ha he naional conceps include ne income from abroad In he case of Swizerland, for insance, given is large holdings of capial abroad, he difference is sizable, boh in erms of levels and in erms of growh raes Anoher issue concerns he difference beween gross and ne measures of value added and income One can cerainly argue ha ne naional income (NNI) is a beer measure of a counry's income and absorpion poenial han GNI Erwin Diewer and his co-auhors have been arguing his poin very forcefully and convincingly in recen years 3 This is paricu- See Kohli (005) The same view has been expressed by Duguay (006) I NTERNATIONAL RODUCTIVITY MONITOR 53

9 larly relevan when sofware expendiures are capialized: hey add subsanially more o GD (GNI) han o ND (NNI) Wha do rading gains mean for he measuremen of produciviy? As far as TF is concerned, here are no consequences Wheher TF is measured relaive o real GD or real GDI does no maer, since he difference beween hese wo quaniy indexes is fully accouned for by he rading gains There will be a difference, however, when i comes o he average produciviy of labour, since he numeraor is no he same wheher or no he rading gains are considered Similar consideraions apply o he (more relevan) marginal measure of labour produciviy, which can be approximaed by he real wage rae: is magniude obviously depends on he price deflaor ha is being used If nominal wages were deflaed by he price of domesic expendiures in lieu of he GD deflaor, hen boh measures of labour produciviy would be affeced in exacly he same proporions as indicaed by a comparison of (3) and (4) One should also keep in mind ha, while produciviy is imporan, i is no he only hing ha maers As argued in his aricle, rading gains are very similar in naure o echnological progress and increases in produciviy Moreover, he disincion beween GD and GN (or beween GDI and GNI) should remind us ha if he ulimae goal of economic aciviies is o maximize welfare, hen acions inended o increase he ne income received from abroad (eg capial ouflows o he res of he world) make perfec sense, even hough hey have no impac on domesic produciviy (whichever way i is measured), or on rading gains for ha maer This suggess ha a fruiful direcion for fuure research migh be he developmen of a broader concep of produciviy, ie a naional measure raher han merely a domesic one Appendix: The Terms of Trade and he Real Exchange Rae The erms of rade and he real exchange rae are someimes used inerchangeably, bu hey are really wo disinc conceps Alhough i is rue ha in he Mundell (1963)-Fleming (196) model of open economy macroeconomics here can be a one-o-one relaionship beween he wo variables, his is generally no so in models ha include more han wo goods The erms of rade and he real exchange rae in he Mundell- Fleming model Assume wo counries, he home counry and he foreign counry Foreign variables are denoed by an aserisk (*) Each counry produces one final good Boh goods are raded inernaionally Their prices are and * As usual we assume he absence of barriers o rade and ransporaions coss Our emphasis here is on real variables, so le us assume ha domesic moneary policy is run in such a way ha he nominal exchange rae is kep consan Alernaively, we could assume ha he currency is he same a home and abroad In he conex of his model he erms of rade (H) are: (A1) H Le λ be he share of he home good in oal domesic expendiures The home counry's price level ( Π ) can hen be defined as: (A) 1 Π Similarly in he foreign counry: 1 * λ (A3) Π λ λ λ * The real exchange rae (E) is ofen defined as he raio of he price levels of he wo counries (he real exchange rae so defined is also known 3 See Diewer, Mizobuchi and Nomura (005), and Diewer and Lawrence (006), for insance 54 N UMBER 13, FALL 006

10 as he real exchange rae (Edwards, 1989)): 1 * λ* Π λ* λ (A4) E = = H 1 λ λ Π If preferences are such ha λ is sricly larger (smaller) han λ E is a monoonically decreasing (increasing) funcion of H For insance, if * λ > λ (ie if preferences are biased owards he local good in boh counries) an improvemen in he erms of rade (an increase in H) necessarily means a real appreciaion of he home currency (a fall in E) If ases are he same in he wo * counries, ie if λ = λ, hen he real exchange rae is consan The erms of rade and he real exchange rae in a four-good model Nex, consider a wo-counry, four-good model There are wo raded, inermediae goods, and wo nonraded, final goods The home (foreign) nonraded good is labeled N (N*), and he wo raded goods (adoping he home counry's perspecive) are idenified by X and M The price of good i (i = N*, X, M) is denoed by i This model is somewha more general han he radiional Ausralian model, since we allow for wo counries and we do no aggregae impors and expors ino a composie good Moreover, raded goods are reaed as middle producs raher han as finished goods Noe also ha because here is now only one final good in each counry he price of he nonraded good can be inerpreed as he price level ( Π = Π = ) The real exchange N,, rae is herefore now given by: (A5) E, whereas he erms of rade are given by (7) repeaed here for convenience: (A6) H X, M, λ The raio of raded vs nonraded good prices is he same as (6) above: T, X, M, (A7) S =, and similarly in he foreign counry: M (A8) T, S X,, = N*, Wih four prices, here can only be hree independen price raios Indeed, one sees ha: S (A9) E = S N*, If we assume ha he home counry is a small open economy, S* can be aken as given and here is a perfec correlaion beween E and S, so ha he wo variables can be used inerchangeably E (or S) and H, on he oher hand, can be viewed as fully independen variables in he small open economy case References Ausralian Bureau of Saisics (004) The Terms of Trade and he Naional Accouns, Ausralian Naional Accouns: Naional Income, Expendiure and roduc, December Burgess, David F (1974) roducion Theory and he Derived Demand for Impors, Journal of Inernaional Economics, Vol 4, pp Corden, W Max (199) Dependen Economy Model of he Balance of aymens, in New algrave Dicionary of Money and Finance (London: Macmillan) Denison, Edward F (1981) Inernaional Transacions in Measures of he Naion's roducion, Survey of Curren Business, Vol 61, pp 17-8 Diewer, W Erwin (1976) Exac and Superlaive Index Numbers, Journal of Economerics, Vol 4, pp Diewer, W Erwin (1978) Superlaive Index Numbers and Consisency in Aggregaion, Economerica, Vol 46, pp Diewer, W Erwin and Denis Lawrence (006) Measuring he Conribuions of roduciviy and Terms of Trade o Ausralia's Economic Welfare, repor by Meyrick and Associaes o he roduciviy Commission, Canberra Diewer, W Erwin, Hide Mizobuchi, and Koji Nomura (005) On Measuring Japan's roduciviy, , unpublished manuscrip Diewer, W Erwin and Caherine J Morrison (1986) Adjusing Oupu and roduciviy Indexes for Changes in he Terms of Trade, Economic Journal, Vol 96, pp Dornbusch, Rudiger (1980) Open Economy Macroeconomics (New York, NY: Basic Books) 1 I NTERNATIONAL RODUCTIVITY MONITOR 55

11 Duguay, ierre (006) roduciviy, Terms of Trade and Economic Adjusmen, paper delivered o he Canadian Associaion for Business Economics Economic Oulook/olicy Forum, Queen's Universiy, Kingson, Onario, Augus 8 Edwards, Sebasian (1989) Economic Liberalizaion and he Equilibrium Real Exchange Rae in Developing Counries, in Guillermo Calvo, Ronald Findlay, eni Kouri, and Jorge Braga de Macedo (eds) Deb, Sabilizaion and Developmen (Oxford: Blackwell) European Union (1996) European Sysem of Naional and Regional Accouns, ESA 1995 hp:// forumeuropaeuin/irc/dsis/nfaccoun/info/ daa/esa95/en/ielenhm Fleming, JM (196) Domesic Financial olicies under Fixed and under Floaing Exchange Raes, IMF Saff apers, Vol 9, pp Frenkel, Jacob A and Michael Mussa (1984) Asse Markes, Exchange Raes, and he Balance of aymens: A Reformulaion of Docrine, in Ronald W Jones and eer Kenan (eds) Handbook of Inernaional Economics (Amserdam: Norh-Holland) Kohli, Ulrich (1978) A Gross Naional roduc Funcion and he Derived Demand for Impors and Supply of Expors, Canadian Journal of Economics, Vol 11, pp Kohli, Ulrich (1983) Technology and he Demand for Impors, Souhern Economic Journal, Vol 50, pp Kohli, Ulrich (1991) Technology, Dualiy, and Foreign Trade: The GN Funcion Approach o Modeling Impors and Expors (Ann Arbor, MI: Universiy of Michigan ress) Kohli, Ulrich (004a) Real GD, Real Domesic Income, and Terms-of-Trade Changes, Journal of Inernaional Economics, Vol 6, pp Kohli, Ulrich (004b) An Implici Törnqvis Index of Real GD, Journal of roduciviy Analysis, Vol 1, pp Kohli, Ulrich (005) Swizerland s Growh Defici: A Real roblem Bu Only Half as Bad as i Looks, in Lukas Seinmann und Hans Rensch (eds) Diagnose: Wachsumsschwäche (Zurich: Verlag Neue Zürcher Zeiung) Kohli, Ulrich (006) Terms-of-Trade Changes, Real GD, and Real Value Added in he Open Economy: Reassessing Hong Kong's Growh erformance, Hong Kong Insiue for Moneary Research Working aper 5/006 Mundell, Rober (1963) Capial Mobiliy and Sabilizaion olicy under Fixed and Flexible Exchange Raes, Canadian Journal of Economics and oliical Science, Vol 9, pp Saler, WEG (1959) Inernal and Exernal Balance: The Role of rice and Expendiure Effecs, Economic Record, Vol 35, pp 6-38 Sanyal, KK, Jones, RW (198) The Theory of Trade in Middle roducs, American Economic Review, Vol 7, pp Unied Naions (00) Sysem of Naional Accouns 1993 hp://unsasunorg/unsd/sna N UMBER 13, FALL 006