The final product is not equal to GDP

Leonid_65 · May 28, 2019, 1:42pm

Hi Prof. Pfeifer and to all,
I have a theoretical question.
Why in the DSGE models the final product is not equal to GDP?
Thank you,
Leonid.

jpfeifer · May 28, 2019, 4:45pm

What do you mean? In some models with adjustment costs, there may a difference, because the adjustment costs would not be part of GDP (they are conceptualized as intermediates)

Leonid_65 · May 29, 2019, 4:40am

Thank you, professor, but I mean final good, which goes to domestic consumption and domestic investment.
Why separate the production sector into a final good sector and intermediate good sector?

jpfeifer · May 30, 2019, 7:03pm

The final good still measures GDP. The production structure reflects intermediate inputs. It is necessary for introducing price rigidities that matter.