Measuring Economic Growth in New Zealand

New Zealand Treasury Working Paper 02/14

Published September 2002

Author: Peter Mawson

Abstract

This paper examines New Zealand’s ranking in the OECD based on real GDP per capita. The fall in ranking experienced by New Zealand implies that real GDP per capita growth in New Zealand has been relatively poor in comparison to other OECD countries. The paper examines the history of New Zealand’s growth rate and explores the differences between various techniques for measuring average growth rates. The approaches are all shown to be variants of the average annual growth rate but differ in terms of the weighting structure used. Ultimately, the most appropriate technique depends on the underlying data generating process. The implications of data construction techniques for measured growth rates are discussed and differences between the growth rates obtained from different data sources are illustrated. The paper also illustrates the sensitivity of New Zealand growth rates to the sample period chosen.

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Abstract Table of Contents List of Tables List of Figures 1 Introduction 2 New Zealand’s place on the OECD ladder 3 Calculating Growth Rates 3.1 Least Squares Growth Rates 3.2 Log Difference Model Growth Rates 3.3 The Average Annual Growth Rate 3.4 Geometric Average Growth Rates 3.5 The four approaches summarised 3.6 Choice of Method 4 Data Construction Techniques and Measured Growth Rates 4.1 Changes in the way New Zealand real GDP is measured 4.2 Different approaches to constructing real GDP series (Chain versus Fixed weights) and their influence on growth rates 5 Measured New Zealand growth rates over time 6 Conclusion References Appendix A A.1 Weighting Scheme of the OLS Growth Rate Estimator A.2 Obtaining the growth rate estimator in a log-difference model A.3 The geometric Average Growth Rate A.4 Proof that Log Difference Regression and Geometric Growth Rates are Equal Appendix B – New Zealand real GDP per capita series Appendix C – New Zealand average annual change growth rates from different data sources Appendix D – New Zealand growth rates and growth rate rankings from alternative data sources	twp02-14.pdf.pdf (464 KB) pp. 1–35
List of Tables Table 1 – New Zealand’s GDP per Capita Ranking Amongst OECD Countries Table 2 – Four techniques to construct a growth rate Table 3 – A comparison of New Zealand growth rates using the alternative techniques to construct a period growth rate Table 4 – Unit Root tests on the natural log of New Zealand real GDP per capita series Table 5 – Sources of New Zealand real GDP per capita data used in this paper Table 6 – Example of a Laspeyres Index Table 7 – Example of a Paasche Index Table 8 – Comparison of annual growth rates for fixed weight real gross domestic expenditure series with different base years Table 9 – New Zealand Growth Rates for Different Window Endpoints and Window Lengths based on OECD data Table 10 – New Zealand’s growth rate ranking in the OECD for a number of different sub-periods based on OECD data Table B1 – New Zealand real GDP per capita series Table C1 – New Zealand average annual change growth rates from different data sources Table D1 – New Zealand Growth Rates for Different Window Endpoints and Window Lengths based on PWT data Table D2– New Zealand’s growth rate ranking in the OECD for a number of different sub-periods based on PWT data Table D3 – New Zealand Growth Rates for Different Window Endpoints and Window Lengths based on Maddison 2001 data Table D4– New Zealand’s growth rate ranking in the OECD for a number of different sub-periods based on Maddison 2001 data Table D5 – New Zealand Growth Rates for Different Window Endpoints and Window Lengths based on Haugh’s Calibrated data List of Figures Figure 1 – New Zealand’s Real GDP per Capita Ranking Amongst OECD Countries Figure 2 – Weighting Scheme for OLS growth rate estimate (T=20) Figure 3 – Maximum/Minimum Weight Ratio for time series of length T Figure 4 – A comparison of different growth rate construction techniques (NZ growth rates measured over different 10 year windows) Figure 5 – A comparison of New Zealand’s growth rates obtained from different data sets (NZ growth rates measured over different 10 year windows) Figure 6 – A comparison of New Zealand’s growth rates obtained from different data sets (NZ growth rates measured over different 10 year windows)

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Abstract

List of Tables

List of Figures

1 Introduction

2 New Zealand’s place on the OECD ladder

3 Calculating Growth Rates

4 Data Construction Techniques and Measured Growth Rates

5 Measured New Zealand growth rates over time

6 Conclusion

References

Appendix A

Appendix B – New Zealand real GDP per capita series

Appendix C – New Zealand average annual change growth rates from different data sources

Appendix D – New Zealand growth rates and growth rate rankings from alternative data sources

twp02-14.pdf.pdf (464 KB) pp. 1–35

List of Tables

List of Figures

Acknowledgements

The author would like to thank Maryanne Aynsley, Iris Claus, Arthur Grimes, Katy Henderson, Dean Hyslop, Nathan McLellan, Grant Scobie, and David Skilling for their helpful comments and suggestions on various draft versions of the paper.

Disclaimer

The views expressed in this Working Paper are those of the author(s) and do not necessarily reflect the views of the New Zealand Treasury. The paper is presented not as policy, but with a view to inform and stimulate wider debate.

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Measuring Economic Growth in New Zealand

Abstract

Contents

Abstract

Table of Contents

List of Tables

List of Figures

1 Introduction

2 New Zealand’s place on the OECD ladder

3 Calculating Growth Rates

4 Data Construction Techniques and Measured Growth Rates

5 Measured New Zealand growth rates over time

6 Conclusion

References

Appendix A

Appendix B – New Zealand real GDP per capita series

Appendix C – New Zealand average annual change growth rates from different data sources

Appendix D – New Zealand growth rates and growth rate rankings from alternative data sources

List of Tables

List of Figures

Acknowledgements

Disclaimer