SOURCES OF ECONOMIC GROWTH FROM DEMAND-SIDE

Sources of economic growth can be explained both from supply-side and demand-side. Supplyside explanation, firstly, calculates contribution of input growth to output growth, and then remaining part of the output growth is admitted as growth rate of technology. Similarly, after calculating contributions of domestic demand and foreign demand, growth rate of technology which is motivated by domestic and foreign demand growth can be calculated. In this study, sources of growth from demand-side are calculated for China for 1972 and 2012. According to the results, growth is completely stemmed from domestic demand growth and technological progress, which is motivated by domestic demand. Since economic growth is motivated by domestic demand, then, macroeconomic policy should focus on domestic demand.