I've noticed that a lot of data online seems to measure a non-US country in USD. This seems odd to me, because doesn't that mean that US fiscal/monetary policies, politics, and economics would affect the GDP numbers for this other country?

From what I understand, the reason for measuring in USD is because it factors in the country's fiscal policy. If the country's government runs a deficit and borrows money, then that is somehow factored in when the GDP is converted to USD. But doesn't that also factor in things unrelated to the given country?

I would have thought that measuring Real GDP would be a better metric for factoring in things like deficits and borrowing. If the government borrows, I that increases inflation, and therefore, measuring Real GDP would factor that in. Is that not the case?

  • $\begingroup$ If you want to avoid the distorting effects of inflation or changing exchange rates, then measure in constant prices; you should get similar results using domestic currency adjusted for inflation or using constant PPP dollars. This has little or nothing to do with fiscal policy and everything to do with prices $\endgroup$ – Henry Oct 19 at 0:36
  • $\begingroup$ The purpose of using a single currency is purely to provide a comparison. The US dollar is the dominant currency, so is commonly used, but is not necessary: Eurostat typically uses the Euro even for non-Eurozone countries. There are issues with different price levels and with measuring changes this way because of the impact of changing exchange rates; one solution is to use PPP dollars $\endgroup$ – Henry Oct 19 at 1:06

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