Тузувчи : Файзуллаева Н

Drivers of GDP Growth

The experts are divided as to what drives GDP growth.  The OECD believes it is a mix of: working age population, migration, labour force participation, education, technological advancements, capital intensity, productivity, savings rate, product market liberalisation, labour market reforms, fiscal consolidation[28]. 

The IMF writes that GDP drivers are amongst others, strong financial institutions, adequate policies, technological advancements, employment growth and consumption[29]. 
Yet it is never clear from these organizations how exactly their drivers affect GDP growth.  Even the US Federal Reserve states that, “how a given adjustment in the federal funds rate [interest rate] will affect growth in aggregate demand [GDP] – in terms of both the overall magnitude and the timing of its impact – is never certain”[30].
In the past a number of analysts have queried the use of GDP[31].  This paper agrees with some of these positions and emphasizes that there is a significant correlation between world real GDP growth (excluding inflation) and world population growth.  Inherently this makes sense due to GDP growth reliance on household consumption and government spending which are both driven by population.  A lot of GDP growth focused structural changes, fiscal and monetary policy decisions would only place money in different hands rather than increasing GDP growth.  Given focusing on individual countries can be distorted through inter-country trade, this paper has focused on the relation of world real GDP growth to world population growth (Figure 1).  The Historical Annual Multiple and Historical Average Multiple (average of the annual multiples for the entire period) in Figure 1 are calculated by dividing the world real GDP growth rate by the world population growth rate each year.  For example in 1971 the world real GDP growth was approximately 4% and the world population growth rate was approximately 2%.  This means that in 1971 the Historical Annual Multiple was 2.0 times.