Current Issues in Economics and Finance

Do Alternative Measures of GDP Affect Its Interpretation?

November 2009Volume 15, Number 7
JEL classification: E01, E30

Authors: Bart Hobijn and Charles Steindel

Gross domestic product's high correlation with unemployment and inflation makes it a key measure of the U.S. economy. Yet the somewhat arbitrary nature of the GDP construction process complicates interpretation and measurement of the indicator. A study of an alternative measure of GDP designed to address the published series' limitations finds that the adjusted measure differs in its representation of the long-term trend—but not the short-term fluctuations—of GDP. The published series' relevance as an indicator is therefore robust to some of the arbitrariness of its construction.

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