Abstract
In this paper, Antoine Brunet questions the OECD method in calculating contributions to GDP growth. He tries to show this method induces the users to seriously misjudge the contribution of external trade balance to GDP growth. He shows there is an alternative method, i.e. the AB method which is mathematically as correct as the OECD one. And this method is much more pertinent and allows the users to distinguish between two kinds of countries: on the one hand, the mercantilist countries and on the other hand, the non-mercantilist countries.
Highlights
IntroductionWhile no one today will deny that demand fuels production, at least in the short term, it is important to differentiate between the two principal categories of demand that are beneficial to a country: domestic demand and net foreign demand
The OECD method is too simplisticWhile no one today will deny that demand fuels production, at least in the short term, it is important to differentiate between the two principal categories of demand that are beneficial to a country: domestic demand and net foreign demand.In many debates, and in a period of global crisis, it is decisive to know, country by country, the relative contribution of domestic demand to GDP growth and that of net foreign demand.Sixty years ago, in 1949, during the period of reconstruction, the economists at the OECD (Organization for Economic Co-operation and Development) hastily invented a rather simplistic method to establish these contributions
∗ AB Marchés : antoinemarie.brunet@orange.fr Received: 17 July 2009. This method has gained quasi-official status: the two major international financial press agencies, Reuters and Bloomberg, have used it systematically whenever commenting on the latest quarterly GDP figures as countries publish them; other international bodies, such as the International Monetary Fund (I.M.F) and World Bank, consider that the OECD method poses no particular problem but has become the method of reference that is used, or should be used, by everyone; leading financial institutions, from Goldman Sachs to Deutsche Bank to JP Morgan, have all approved the OECD method and used it systematically
Summary
While no one today will deny that demand fuels production, at least in the short term, it is important to differentiate between the two principal categories of demand that are beneficial to a country: domestic demand and net foreign demand. This method remains widely used, and until now has not raised any real objections Over the years, this method has gained quasi-official status: the two major international financial press agencies, Reuters and Bloomberg, have used it systematically whenever commenting on the latest quarterly GDP figures as countries publish them; other international bodies, such as the International Monetary Fund (I.M.F) and World Bank, consider that the OECD method poses no particular problem but has become the method of reference that is used, or should be used, by everyone; leading financial institutions, from Goldman Sachs to Deutsche Bank to JP Morgan, have all approved the OECD method and used it systematically. We will conclude there are two different strategies towards GDP growth, the mercantilist one and the non-mercantilist one
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