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Accounting for Growth and Output Gaps: Evidence from New Zealand
Author(s) -
Fox Kevin J.,
Kohli Ulrich,
Warren Jr. Ronald S.
Publication year - 2002
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.00060
Subject(s) - economics , growth accounting , total factor productivity , real gross domestic product , productivity , output gap , index (typography) , national accounts , econometrics , gross output , macroeconomics , monetary economics , capital (architecture) , production (economics) , monetary policy , geography , world wide web , computer science , archaeology
We evaluate New Zealand’s macroeconomic performance over the 1967–1996 period, which witnessed numerous economic reforms. Using both index–number and econometric techniques, we decompose nominal GDP growth and the output gap into contributions from price level changes, productivity growth and changes in factor utilisation. Changes in domestic prices accounted for four–fifths of the growth in nominal GDP, while capital accumulation and employment growth were the most important factors determining real–output growth. Deviations in the domestic price level around its long–run trend contributed most heavily to changes in the nominal output gap. The real gap was influenced in any year variously by deviations of the terms of trade and labour input from their long–run trends, as well as by productivity shocks.