Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/205474 
Year of Publication: 
2001
Series/Report no.: 
New Zealand Treasury Working Paper No. 01/33
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
The variance of New Zealand's real GDP has declined since the mid-1980s. To investigate why, this paper decomposes the variance of chain-weighted estimates of production-based real GDP growth into sector shares, sector growth rate variances and co-variances. The principal explanation for the decline in GDP volatility is a fall in the sum of sector variances driven by a decline in the Services and Manufacturing sector production growth variances. Sector co-variances have had a dominant influence on the profile of GDP volatility and this influence has not diminished. Despite marked changes in sector shares, notably increases in Services and Primary sector shares and a decrease in the share of Manufacturing, this has not been a significant factor influencing the decline in GDP volatility. We postulate that policy interventions such as "Think Big", regulatory interventions during the early 1980s, and the introduction of GST are key explanations for the higher volatility until the mid 1980s. Cessation of these interventions, deregulation and possibly changes in inventory management methods are important reasons why GDP volatility has fallen since then.
Subjects: 
Volatility
growth
production sector shares
manufacturing
services
primary
construction.
JEL: 
E23
E32
L6
Creative Commons License: 
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Document Type: 
Working Paper

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