Financial systems and development

same value, without altering the trend of either. All growth rates shown are calculated from con-
Components of GDP are individually rescaled and stant price series and, unless otherwise noted,
are summed up to provide GDP and its subaggre- have been computed using the least-squares
gates. In this process, a rescaling deviation may method. The least-squares growth rate, r, is estioccur
between constant price gross domestic prod- mated by fitting a least-squares linear regression
uct by industrial origin and GDP by expenditure. trend line to the logarithmic annual values of the
Such rescaling deviations are absorbed under the variable in the relevant period. More specifically,
heading private consumption, etc., on the assump- the regression equation takes the form: log Xt = a
tion that GDP by industrial origin is a more reliable + bt + et, where this is equivalent to the logarithestimate
than GDP by expenditure.
mic transformation of the compound growth rate
This approach takes into account the effects of equation, X, = X, (1 + r)t. In these equations, X is
changes in intersectoral relative prices between the the variable, t is time, and a = log X, and b = log (1
original and the new base period. Because private + r) are the parameters to be estimated; e is the
consumption is calculated as a residual, the na- error term. If b* is the least-squares estimate of b,
tional accounting identities are maintained. It then the annual average growth rate, r, is obtained
does, however, involve incorporating in private as [antilog (b*)]-l, and multiplied by 100 to exconsumption
whatever statistical discrepancies press it in percentage terms.
arise for expenditure in the rebasing process. The
value added in the services sector also includes a Table 1. Basic indicators
statistical discrepancy as reported by the original
source.
Population estimates for mid-1987 are based on data
The summary measures are calculated by simple from the Population Division of the United Naaddition
when a variable is expressed in reason- tions (U.N.) or from World Bank sources. These
ably comparable units of account. Indicators that are normally projections, usually based on data
do not seem naturally additive are usually com- from the most recent population censuses or surbined
by a price weighting scheme. It should be veys, which, in some cases, are neither recent nor
emphasized, however, that use of a single base very accurate. Note that refugees not permanently
year raises problems over a period encompassing settled in the country of asylum are generally conprofound
structural changes and significant sidered to be part of the population of their counchanges
in relative prices, such as have occurred try of origin.
from 1965 to 1987.
The data on area are from the Food and Agricul-
The World Development Indicators, unlike the ture Organization (FAO). For basic indicators on
World Tables, does not present time series. For sum- economies with populations of less than 1 million,
mary measures that cover many years, it is impor- see the table in Box A. 1. For selected indicators on
tant that the calculation is based on the same coun- nonreporting nonmember economies, see the table
try composition over time and across topics. The in Box A.2.
World Development Indicators does so by permit- Gross national product (GNP) measures the total
ting group measures to be compiled only if the domestic and foreign value added claimed by resicountry
data available for a given year account for dents and is calculated without making deductions
at least two-thirds of the full group, as defined by for depreciation. It comprises GDP (defined in the
the 1980 benchmarks. So long as that criterion is note for Table 2) plus net factor income from
met, uncurrent reporters (and those not providing abroad, which is the income residents receive from
ample history) are, for years with missing data, abroad for factor services (labor and capital) less
assumed to behave like the sample of the group similar payments made to nonresidents who conthat
does provide estimates. Readers should keep tributed to the domestic economy.
in mind that the purpose is to maintain an appro- GNP per capita figures in U.S. dollars are calcupriate
relationship across topics, despite myriad lated according to the World Bank Atlas method.
problems with country data, and that nothing The Bank recognizes that perfect cross-country
meaningful can be deduced about behavior at the comparability of GNP per capita estimates cannot
country level by working back from group indica- be achieved. Beyond the classic, strictly intractators.
In addition, the weighting process may result ble, index number problem, two obstacles stand in
in discrepancies between summed subgroup fig- the way of adequate comparability. One concerns
ures and overall totals. See the introduction to the the GNP and population estimates themselves.
World Tables for further details.
There are differences in national accounting and
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