Are EM Problems Really Structural?

by Michael J. Howell14. April 2014 13:09

In a just-released report we use Total Factor Productivity (TFP) data to highlight the worrying decline in the economic efficiency of many EM economies, notably China. The chart below highlights China and shows the essential problem. TFP measures 'true' value-added. Chinese TFP added 8% points to GDP growth in the early 2000s, but now TFP contributes nothing and is below US TFP. In short, China's true efficiency-adjusted growth rate is less than America's. But isn't this what financial markets have been trying to tell us?

Chinese and US Total Factor Productivity (% point contribution to GDP Growth)


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