Economic Growth of the Czech Republic in the Light of Real Income Indicators

Abstract

The aim of the work is to show that GDP as it is currently calculated should not be used as the only aggregate indicator for evaluation of the overall development in the economy. Obtaining more complete and objective indication of development of the economy additionally requires analysis of development in aggregate indicators of real income, which consider gains or losses resulting from changes in terms of trade and the processes of primary and secondary distribution of incomes between the domestic economy and the world. Certain characteristics typical for the Czech economy require the use of real income indicators. The first part of the study outlines macroeconomic relations of foreign trade and terms of trade and their impact on the real domestic income indicator. It includes quantification of the impact of changes in terms of trade and the development of real domestic income in the CR during 1996-2004. The second part addresses transition from GDP expressed in fixed prices and real domestic income to real national income. It highlights the significance of the efflux of incomes abroad through the process of primary distribution and illustrates the development in real national income during 1996-2004. The third part analyses the development in real disposable income. The analysis of development in aggregate real income indicator for the Czech Republic during 1996-2004 is based on annual and quarterly national accounts published by the Czech Statistical Office (CSU).