Discussion paper

DP12300 Measuring Aggregate Economic Activity

Popular ways of measuring aggregate economic activity include the Fisher index of GDP, Weitzman's NDP in consumption units, and GDP in consumption units. We show that it matters which measure is used, because their growth rates differed considerably in the postwar U.S. We compare the properties of the measures in the two-sector growth model and show that the Fisher index of GDP is the preferable measure to use. It has a welfare interpretation under mild restrictions that allow the growth model to match the observed secular decline in the relative price of investment and the observed productivity growth slowdown.


Valentinyi, A, G Duernecker and B Herrendorf (2020), ‘DP12300 Measuring Aggregate Economic Activity‘, CEPR Discussion Paper No. 12300. CEPR Press, Paris & London. https://cepr.org/publications/dp12300