Real GNP Growth Research Articles

La fiabilité des prévisions macroéconomiques à court terme : 12 ans d'expériences françaises (1970-1981)

This paper considers the accuracy of the short-term economic forecasts of twelve French organizations over the period 1970-1981. Discrepancies between forecast and actual values depend mainly on the macro-economic aggregates and forecasting horizon considered. The absolute error on the rate of growth of real GNP is from 0.8 to 1.3 point while for the annual rate of inflation, it is from 1.1 to 2.1 points. In general, over the period in question, forecasters tend to over-optimism ; real GNP growth being on average overestimated by 0.4 point whereas annual inflation is underestimated by 1.5 point. > From a comparison of the various forecasts with results obtained by so-called « naïve methods », it can be seen that a forecast over a 12 to 18 months horizon normally follows the trend of the recent past. A survey of forecasts by foreign organizations confirms the conclusions of the paper. Nominal variables are underestimated, foreign trade and fluctuations in investment levels are badly forecast while GNP growth is, on the whole, overestimated. From the comparison of forecasting errors between the first and second oil shocks, it seems that, despite turbulence in the world economy, short-term forecasting and trade-cycle analysis have made some progress since, in many cases, the errors have been very considerably reduced.

An Empirical Analysis of the Relationship between Inflation and Economic Growth in 12 Countries, 1950-1969. A Comment

This comment shows that some of the results in Paldam's article An Empirical Analysis of the Relationship between Inflation and Economic Growth in 12 Countries, 1950-69, The Swedish Journal of Economics, Vol. 75, 1973, No. 4, pp. 420-27, [2], are unreliable due to the applied methods of analysis and to the kinds of errors in variables which are likely to be present in his data. The conclusions drawn by Paldam are summarized in five points (Paldam [2], pp. 425-26): (1) In the long run there is no (or at most a weak) relation between price increases and real growth as regards GNP (as well as private consumption). (2) In the very short run-i.e. within the same year-the relation is negative; weakly negative as regards GNP (and clearly negative as regards private consumption). (3) After particularly large (small) real growth there will normally follow particularly large (small) price increases during the next few years. As regards GNP the effect is greatest after one year (and as regards private consumption not until two years afterwards). (4) After a particularly large (small) price increase there will normally follow particularly small (large) real growth during the next few years. (5) More inertia is evident in the price increases than in real growth. The study is based on five data series, collected for each country. On the basis of these series, fifteen series of growth rates have been formed. In order to simplify the discussion we will consider the following case. Let Yt be GNP in current prices and Qt be GNP in fixed prices, while Pt is the GNP deflator. Obviously Qt YtIPt. The study by Paldam [2] can then be presented in a simplified version as a study of correlations between Pt-, and q t-T2 t = 1, 2, 3 ..., T; m, -r2 =0, 1, 2, where Pt is the inflation rate and qt the rate of growth in real GNP. It is a well-known result that errors in variables imply biases (see Johnston [1], Ch. 9), but it seems that in this case the biases will become particularly

1976 Forecast of Gross National Product, Consumer Spending, Saving, and Housing

The U.S. economy has recovered much of the ground lost in the current recession and is moving into a more prosperous phase that is precarious but sustainable. The prosperity is precarious not because of inherent weaknesses but because 1976 is a presidential year. The chief danger is of massive fiscal injections that would do far more harm than good. I am counting on an irresolution of forces in Washington to prevent any major fiscal stimulus beyond the desirable extension of the temporary tax changes of 1975. On that basis, I believe the present economic recovery is sustainable and that the rate of inflation will continue to ease. Economic growth will proceed at a mildly accelerating pace from the fourth quarter of 1975 through the end of 1976 and beyond. In the absence of blunder or catastrophe, it is reasonable to forecast an extended period of prosperity. My estimate is that GNP in 1976 will total $1,656 billion, about $178 billion more than this year. Nearly half of the gain will result from a 5.7 percent rise in prices; the increase in real goods and services will be 6 percent. Growth of real GNP during 1976 will advance from a 4 percent rate in the first quarter to 6 percent in the final quarter. The trend of inflation will move in the other direction, with prices rising at a 6 percent rate early in the year and slipping to a 5 percent rate in the second half. In 1976 household consumers will not just' support the economy as they did in 1975 but will play a major role in stimulating economic growth. Real consumer income (adjusted for prices and taxes) will reach new peaks next year, and consumers are expected to spend a greater percentage of these larger incomes with purchase gains especially large for durable consumer goods. In spite of the advance in general prosperity, unemployment will shrink only moderately. Unemployment will average about 8 percent in 1976 and in the final quarter will be only 1 percentage point lower than the current rate of approximately 8.5 percent. Let me spell out my assumptions and major reasons for these conclusions. I am assuming that the 1975 tax cuts will be extended for all or a major part of 1976. While they were not essential to recovery in 1975, they

An Energy Overview: Today and Tomorrow

The status of U.S. energy, resources is reviewed with an eye toward the nation's goal of energy base and the technological capability for making reat strides toward self-sufficiency, a number of changes will have to be made before that goal is reached. Introduction A look ahead at the nation's energy future is particularly timely since we are now approaching the particularly timely since we are now approaching the bicentennial year of our independence. We face the formidable task of trying to win a larger measure of energy independence - one that will make us less vulnerable to the concerted actions of a few foreign oil-producing countries. Complete energy independence is impossible in the short run and is unlikely for years to come. Production from existing reserves of oil in the United States continues to decline. Long lead times are involved in discovering and developing new supplies from remote areas and in expanding supplemental energy sources. Even with our best efforts to conserve energy and to develop additional domestic energy resources, we cannot avoid a growing dependence on imported oil for many years. Projections of the future energy environment provide one basis for planning and critical investment decisions that must precede actual operations by many years. Projections, however, can deal only in reasonable Projections, however, can deal only in reasonable possibilities and, of necessity, are closely linked to their possibilities and, of necessity, are closely linked to their underlying assumptions. Assumptions Looking at the economy (see Table 1), we assume real GNP growth will be somewhat slower than the historical rate - about 3.6 percent/year compared with an average growth of about 4 percent during the 1960's. We see the economy trending toward full employment, but with a lower-than-historical growth in productivity. We assume that energy prices will increase at essentially the inflation rate. On the political front, we envision an evolutionary development of government energy policy. We assume no government mandates that would curtail energy consumption below economic levels or would force the use of one fuel in preference to another. We also assume that the energy industries will be permitted profits sufficient to attract needed investment capital. We assume, too, that environmental goals will be achieved at a rate compatible with economic growth. This means a delay in attaining some announced environmental goals.. It also entails access to government-owned energy resources, fewer siting delays, and local variances to air-quality standards where the alternative would be to shut down existing facilities. Looking farther afield at energy availability worldwide, our studies assume that enough oil imports will be available to balance demand, but that gas imports will be limited. U.S. Energy Demand In Fig. 1 energy demand is divided among the various consuming sectors. The left-hand scale is expressed in quadrillions of British thermal units per year and the scale on the right shows millions of barrels per day of oil equivalent. The nonenergy sector reflects the use of oil, natural gas, and metallurgical coal as feed stock or raw materials. JPT P. 7

HOUSEHOLD PRODUCTION AND NATIONAL PRODUCTION: AN IMPROVEMENT OF THE RECORD

Man may work from sun to sun, But woman's work is never done. Anon. It has become almost a cliché that measured growth in the U.S. is being overstated. The classic on the subject is by Mishan [5], who argues persuasively that the (uncounted) externalities from production in industrialized economies are overtaking the production which these economies are counting. But externalities are not the only problems in measuring economic activity and economic growth. Two other problems of equal importance, but more amenable to measurement, are the distinction between final and intermediate production, and the quantification of nonmarket productive behavior. In this paper, we concentrate on one aspect of the measurement of nonmarket behavior—the value of production at home by housewives.1Specifically, we will present estimates of the value of home based nonmarket production by housewives. These estimates will then be used to supplement various national product aggregates in order to calculate more accurate growth rates for the U.S. economy. We find that the value of nonmarket production by married women during the 1960's has averaged approximately thirty percent of the GNP and close to 40 percent of the national income. The inclusion of the nonmarket work of housewives in GNP would reduce the measured rate of growth of real GNP per potential worker by about ten percent, the exact amount depending on how the value of nonmarket work is estimated. Our estimates indicate a reduction in the absolute rate of growth of almost 0.25 percent.

The Success of Anti-Inflation Policies in the United States

Fall of 1971 is not a timely moment to write a paper evaluating The Success of Anti-Inflation Policies in the United States. It should be written about this time next year when we have had a chance to see at least the initial results of President Nixon's new anti-inflation program which will be a unique chapter in our experience. As it is, perhaps this paper can serve as documentation of the need for such a program. We have just been through the biggest failure of conventional stabilization policy to control inflation in our history. By conventional stabilization policy I mean the use of aggregate fiscal and monetary policies to control the rate of expansion of aggregate demand. And in grading this period the biggest failure of conventional policy I am not making a political judgment but a judgment about conventional policies. I have no reason to think that results would have been any better if the same degree of economic slowdown had been engineered by Arthur Okun ant Hubert Humphrey than by Paul McCracken and Richard Nixon. Other important differences would no doubt have existed with policy-making in different hands. But it is fair to say that no economist or economic model would have, in 1969, predicted the rate of inflation we have had this year if the correct information about the economic slowdown-about real GNP growth and unemployment in the intervening period-had been available at the time of the forecast. This is just another way of saying that inflation in general is a complicated rather than a simple

THE TREATMENT OF INTANGIBLE RESOURCES AS CAPITAL

The author describes the results of his current research designed to measure total investment, tangible and intangible, and the derived capital stocks for the U.S., 1929–1966. With respect to total investment, the estimates show a marked increase in its ratio to GNP. All of the increase occurs in the intangible component comprising R & D, education and training, health, and mobility. The increase was concentrated in the government sector, although households increased the proportion of disposable personal income devoted to total investment.Consistent with the relative investment trends, the stock of intangible capital grew considerably faster than the tangible stock. The growth of total capital stocks was somewhat less than that of GNP, however, in both current and constant prices. Thus, the rate of return on total capital rose somewhat over the period. Average rates of return on human and nonhuman capital were closely similar.In real terms, the growth of total capital stocks accounted for two‐thirds of the growth in real GNP, 1929–1966. One‐third of the growth is attributed to residual forces, chiefly economies of scale, changes in inherent quality of human and natural resources, changes in values and motivations, and changes in rates of utilization of capacity.The growth of the ratio of real intangible stocks to real tangible stocks accounted for less than half of the increase in total factor productivity 1929–1966. This is significantly less than the contribution of intangibles as estimated by Denison, and the author adduces several reasons why his estimates may understate the contribution. Nevertheless, it seems that the net effect of the residual forces enumerated above must also have made a substantial contribution to the growth of tangible factor productivity and real GNP over the 37‐year period.

Military Officers and Political Leadership: The Ghanaian Case

The literature on military intervention in the so-called developing areas poses, and attempts to answer, two general questions: first, what the causes of military interventions in the politics of modernizing countries are; and second, what effects such interventions have on the processes of modernization and political development. In this article I shall deal with these questions in relation to a single empirical case-the West African state of Ghana. I shall reformulate the second question to some extent in my discussion, inquiring what three and a half years of military rule have revealed about the political leadership capabilities of the Ghanaian military regime in tackling the twin problems of economic and political development. The economic situation facing the military upon their assumption of power in Ghana on February 24, 1966, was dismal, The Gross National Product had been stagnant over the previous five-year period, with only a .7 percent overall growth in real GNP per capita between 1960 and 1965, including a decline in real GNP per capita of 2.1 percent between 1964 and 1965.' There was an adverse balance of payments situation and a concomitant shortage of foreign reserves. The foreign debt was large and payment on the bulk of it was short-term, 51 percent being payable within five years. Douglas Scott, a Massachusetts Institute of Technology economist, has estimated that Ghana's foreign debt servicing structure was among the worst in the world at that time.2 Inflation was another persistent problem, the national retail price index having practically doubled in the decade 1955-65.3 The labor market was characterized

Economic Trends in Asia in 1966

This paper focuses primarily on the countries of Free Asia, excluding Japan. Reference to Asian countries should be taken as excluding Japan unless Japan's inclusion is specifically stated. The economic performance of the Asian countries in 1966 as measured by growth of real GNP ranged from an impressive 12%o for Korea to a negative 2% for Burma. Over half the countries for which data are available had rates of increase of 5% or better. The average rate of growth for these same countries was also high during the 1960-66 period. In six out of 14 countries, consumer prices rose almost 10% or more. In addition, there was an acceleration in the rate of inflation in 1966 as compared to the trend in 1960-65. Fortunately, no other country matched Indonesia in 1966 with her 635%o increase in prices. The inflationary pressures, however, did contribute to a depreciation of some currencies in free foreign exchange markets. This was particularly true of the currencies of India, Vietnam, Indonesia, Pakistan and Ceylon. Export performance in 1966 varied even more markedly than growth of GNP from country to country. The largest increase in exports was recorded by Korea, with a rise over the previous year of 43%o. Taiwan bad a very respectable 19% gain, followed by Hong Kong, Pakistan and Singapore. Several countries-India, Indonesia, Ceylon, Burma, Cambodia, and Vietnam-had declines in export earnings. This was enough to keep the rate of export growth for the area down to a modest 4%, which was below the rate of growth in 1965. Although exports of a few of the smaller countries have grown rapidly for several years, the sluggish performance of some of the large countries has held down export growth for the area as a whole, excluding Japan. The result is that Japanese exports in 1966 exceeded the exports of all the other Asian countries combined. In 1960, Japanese exports were equal to about half of the total exports for the rest of Asia. The U.S. trade position vis-a-vis the Asian area continued to deteriorate. Between 1964 and 1966, the U.S. trade surplus with the area was cut twothirds, or from $1.5 billion to $500 million. This reflects a rapid rise in U.S. imports and only a moderate rise in U.S. exports. In addition, the U.S. appears to have lost its traditional trade surplus with Japan. In 1964, the

The Recent Growth Record of the American Economy:

IN AN ARTICLE in this Journal,l Professor Wallace C. Peterson advances the hypothesis that the primary source of the substantial growth in real consumption per capita since World War II was a shift in the end-use of the nation's total output rather than a growth in real Gross National Product per capita. This shift was possible, it is explained, because of the tremendous growth in real GNP (54.5 per cent) and real GNP per capita (47.4 per cent) during World War II (i.e., in Peterson's discussion, the growth between 1940 and 1944). After the war a large proportion of the resources which had been used in the production of military goods were shifted to the production of consumer goods, so that real consumption per capita could increase without correlative increases in real GNP per capita. While real GNP per capita was $2,297 in 1944 and only $143 higher in 1960, real consumption per capita increased from $1,158 in 1944 to $1,651 in 1960, an increase of $493. Within the framework of Professor Peterson's reference, the large-scale shift of resources from wartime to peacetime production seems to be the only adequate explanation of how real consumption per capita could increase 42.6 per cent between 1944 and 1960, while real GNP per capita increased only 6.2 per cent in the same period.