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Measuring Economic Growth with a Fully Identified Three-Signal Model

Andrea Civelli¹; Arya Gaduh²; Ahmed Sadek Yousuf³

¹ University of Arkansas [email protected] · ² University of Arkansas, NBER [email protected] · ³ North South University [email protected]

We augment Henderson et al. (2012)'s two-signal model of true GDP growth with a third signal to overcome its underidentification problem. The additional moment conditions from the third signal help fully identify all model parameters without ad-hoc calibrations of the GDP's signal-to-noise ratio. We characterize the necessary properties of the third signal. Using the model, we recover the optimal weight of official GDP in the composite true GDP growth estimates, which varies with the quality of the national statistics. The model improves on existing methodologies that use signals to measure true income.

DOI

10.1162/rest_a_01489

Pages

1-30

Language

en

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