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    Growth Rates

    Growth rates are calculated as annual averages and represented as percentages. Except where noted, growth rates of values are computed from constant price series. Three principal methods are used to calculate growth rates: least squares, exponential endpoint, and geometric endpoint. Rates of change from one period to the next are calculated as proportional changes from the earlier period.

    Least-squares growth rate. Least-squares growth rates are used wherever there is a sufficiently long time series to permit a reliable calculation. No growth rate is calculated if more than half the observations in a period are missing. The least-squares growth rate, r, is estimated by fitting a linear regression trend line to the logarithmic annual values of the variable in the relevant period. The regression equation takes the form

     

    ln Xt = a + bt,

     

    which is equivalent to the logarithmic transformation of the compound growth equation,

    Xt = Xo (1 + r)t . = Xo (1 + r)t . = Xo (1 + r)t .

    In this equation X is the variable, t is time, and a = ln Xo and b =

    ln (1 + r) are parameters to be estimated. If b* is the least-squares estimate of b, the average annual growth rate, r, is obtained as [exp(b*) – 1] and is multiplied by 100 for expression as a percentage. 

    The calculated growth rate is an average rate that is representative of the available observations over the entire period. It does not necessarily match the actual growth rate between any two periods.

    Exponential growth rate. The growth rate between two points in time for certain demographic indicators, notably labor force and population, is calculated from the equation

     first methodology equation,

    where pn and p1 are the last and first observations in the period, n is the number of years in the period, and ln is the natural logarithm operator. This growth rate is based on a model of continuous, exponential growth between two points in time. It does not take into account the intermediate values of the series. Nor does it correspond to the annual rate of change measured at a one-year interval, which is given by (pn – pn-1)/pn-1.

     

    Geometric growth rate. The geometric growth rate is applicable to compound growth over discrete periods, such as the payment and reinvestment of interest or dividends. Although continuous growth, as modeled by the exponential growth rate, may be more realistic, most economic phenomena are measured only at intervals, in which case the compound growth model is appropriate. The average growth rate over n periods is calculated as

     

    second methodology equation 

     

    Like the exponential growth rate, it does not take into account intermediate values of the series.




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