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Evaluation of GDP growth in Poland in 1996-�2005 and in a longer-term perspective by use of discounting methods

By Juliusz Kotyński

Abstract

The paper explains how some discounting cash flows (DCF) methods can beadapted to analyses of macroeconomic trends, related e.g. to long-termchanges in GDP. Average annual growth rate in GDP in Poland in 1996-2005has been evaluated by use of the method analogous to that used for calculationof the Internal Rate of Return (IRR) in microeconomic analyses. Contrarily tothe generally used geometricmean, the proposed average growth rate (equivalent to that proposed earlier by I. Timofiejuk) takes into account the accumulated volume of the GDP generated over the whole analysed period, and notmerely the ratio of the GDP volume in the last year to that of the base one. This prevents the bias favouring a potential choice of the delayed growth trajectory, yielding identical growth index for the last year of the period as someother (uniform or accelerated) growth patterns, but characterised by a lowervolume of the GDP accrued over that period. Calculation of current value of GDP flows for past or future multi-year periodshas a sound economic meaning and can be a valuable tool of macroeconomical analyses and studies of growth policy options, adding new arguments for possible growth now trajectories. It has been found out that the internal growth rate of GDP in Polandamounted to 4.8% annually in 1996-2003, as compared to 4.0% geometric average rate for that period. The corresponding IRR rate for the years 1996-2005 has been estimated at 4.5-4.6%, against 4.2%-4.3% geometric average.Final section deals with comparative trends in GDP in Poland and other member states of the EU. Strong economic upturn in Poland in 2003-2004 has beena surprise tomany experts. The growth has been faster than forecast by the European Commission and OECD. It is supposed to continue after the accession.

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