If I, a citizen from South Korea, borrow $100000 from a Japanese bank to fund my purchase of a new Mercedes in the US, I'll be contributing to the GDP of US. However, will I be contributing to the GNP of South Korea in any way because it isn't my money?

My own answer is that no, because it is the money used from the Japanese bank.

Would appreciate some help with this.


1 Answer 1


This will still count towards GNP as it would be counted as US export to Korea. GNP is given by:

$$GNP=C+I+G+X-M + NFI$$

Where $C$ is consumption , $I$ investment l, $G$ government spending, $X-M$ are net exports an NFI is a net factor income, that is factor income of foreign residents minus factor income of non-residents (eg see the definition in Todaro & Smith, 2011. Economic Development 12th ed).

As explained above the exports themself would still be counted toward GNP, with a caveat that if the person who sold you the Mercedes is not considered a resident of the US, the value of the Mercedes would be subtracted via $NFI$. However, in that case it would still not count toward Japanese GNP if the non resident who sold you the car wasn’t from Japan. Where the loan originated is irrelevant here. Only if that seller was Japanese resident it would count.

Additionally if the seller of the Mercedes would be resident of Korea, you would actually contribute to the Korean GNP, since that would increase NIF of Korea.

  • $\begingroup$ Thanks for the really detailed answer. Just to clarify, if I'm in the US while making the Mercedes purchase, does it still count as "export"? As I'm not ordering it online $\endgroup$ Oct 16, 2021 at 11:01
  • $\begingroup$ @KojoSledgehammer you don’t need to order it online, if you go personally to seal the deal but you live in Korea and car will be delivered there it would be an export. Exports/exporting existed before internet $\endgroup$
    – 1muflon1
    Oct 16, 2021 at 11:13
  • $\begingroup$ Oh sorry, in my scenario I meant I’ll be using the car in the US, not Korea $\endgroup$ Oct 17, 2021 at 2:13
  • $\begingroup$ @KojoSledgehammer then if you are staying in the US this would count as US spending $\endgroup$
    – 1muflon1
    Oct 17, 2021 at 10:06

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