1. Measuring production factor contributions to growth: A novel expenditure-based sectoral PPP approach
Saša Drezgić

2. Clear objective, step forward
Trace output growth sector by sector to three main factors of production
Real capital
Raw labor
Human capital
… by converting nominal to real values sector by sector using a different PPP conversion factor for each sector reflecting relative price changes
In principle, clear advantage over current practice
Tracing aggregate output growth to factors of production without PPP adjustment, or
Tracing sectoral output growth to factors of production using the same PPP conversion factor for all sectors
But where is efficiency? – trade, institutions, etc.

3. Measuring human capital
Total hours worked by high-skilled persons engaged
Differences in hours reflect several factors, including social security, tradition, etc.
Other possibility: Mincer equation
u = years of schooling
v = 0.1, so each year of schooling increases H/L by 10%
Can measure u by school life expectancy as reported by UNESCO
SLE varies significantly across countries

4. Value added
It would be helpful if the value added in the new approach could be demonstrated
E.g., by showing that it reduces the Solow residual (“measure of our ignorance”)
E.g., by comparing the disaggregated sources-of- growth analysis with the results of similar growth analysis based on aggregate output
I.e., it would be helpful to demonstrate the quantitative benefits of disaggregation
E.g., perhaps disaggregation systematically affects our measures of the relative contributions to growth by individual factors
For starters, why not compare traded and non- traded output? – e.g., contribution of education

5. Value added
Need more room for explicit consideration of efficiency – e.g., as a residual
Openness
Governance
EU perspective
Other work suggests that efficiency may be more important for growth than investment
Hence, main question could be rephrased as
Does proper accounting for sector-by-sector PPP conversion alter our views on the contributions of investment, education, and efficiency to economic growth?

6. Marina Tkalec Maruška Vizek
SHOULD THE CNB DEVALUATE THE EXCHANGE RATE? EVIDENCE FROM PURCHASING POWER PARITY
Marina Tkalec
Maruška Vizek

7. Law of one price in context
Deviations from PPP are only one of several indicators of currency misalignments
Other indicators of overvaluation include
Persistent and large current account deficits
Escalation of external debt
High inflation
Low reserves
In violation of the Giudotti-Greenspan rule

8. Croatia: External debt 1994-2007 (% of gni)

9. Croatia: Current account balance 1993-2008 (% of gni)