The conventional measure of real GDP underestimates the growth in real value added when the terms of trade improve. Thus, in New Zealand, where the terms of trade have been improving over the past 15 years, real GDP has underestimated the country's real growth performance by nearly 0.4% per year...

We extend Fox, Kohli, and Warren (2002) by using alternative techniques to re-examine the sources of New Zealand's macroeconomic performance during the period 1983-2001. Specifically, a modified Diewert-Morrison decomposition is used to quantify the separate contributions from productivity...