Real GDI, Productivity, and the Terms of Trade in Canada

Abstract

In this paper, a quarterly dataset of productivity is built for the Canadian business sector, and the Diewert and Yu (2012a) estimates of annual productivity growth are revised and updated to reflect changes in the new Canadian system of national economic accounts. The quarterly data are then used to study the contribution of total factor productivity and the terms of trade to growth of real gross domestic income. In most years of the 2000s, the contribution of the terms of trade became significant in real income growth, whereas that of total factor productivity growth was stagnant. Improvement in the terms of trade arises froma decline in the import price index and an increase in the export price index.