Generalized Multi-Product Decomposition of Elements of the Use of Russia's GDP

Abstract

The paper offers a new method of decomposition of GDP and its elements. It is based on the idea that every component can be represented as a combination of a smaller number of ag­gregates. The proposed method has a range of important theoretical properties that insure its correctness and reproduces the statistics with very high quality. The theoretical reasoning of the procedure is presented, 3-product decomposition is analysed. Decomposition of indicators in both current and fixed prices is presented.

The proposed decomposition has a range of advantages compared to earlier procedures. First, it does not link any model products to aggregates, observed in statistics. Second, it decomposes the statistics into a higher number of unobserved products, and these products and their prices can be reasonably interpreted. Finally, the important distinction from earlier procedures in non-linearity in real prices.

Apart from that, the paper proposes a method of harmonization of GDP and its elements statistics that is needed to work with these indicators after two recent methodology changes.