The Federal Reserve Bank of New York today released Do Alternative Measures of GDP Affect Its Interpretation?, the latest article in its series Current Issues in Economics and Finance.
Authors Bart Hobijn and Charles Steindel construct an alternative measure of real gross domestic product (GDP) by expanding the scope of economic activity covered to address limitations in the standard series published by the U.S. Bureau of Economic Analysis (BEA). A study of the alternative measure between 1983 and 2003 reveals that changing many of the assumptions and modifications made by the BEA to estimate GDP has little effect on short-term fluctuations of the index, confirming the relevance of the published series as an indicator of ongoing aggregate economic activity.
GDP typically has a high correlation with unemployment and inflation, making it a key measure of the economy and an essential tool for the formulation of monetary and fiscal policy. The authors note that fluctuations in GDP are not the only indicators of
short-term movements in aggregate economic activity, and suggest industrial production may provide a useful alternative.
Bart Hobijn is a research advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco and Charles Steindel is a senior vice president in the Macroeconomic and Monetary Studies Function of the Federal Reserve Bank of New York.
Do Alternative Measures of GDP Affect Its Interpretation? ››