GDPPibound
GDPPibound is a theoretical bound in macroeconomic modeling that constrains the growth path of real gross domestic product (GDP) in relation to price‑level dynamics, denoted by pi. The bound is intended to capture the intuition that sustained real growth cannot be entirely decoupled from inflation when prices respond to demand and supply conditions. In a generic formulation, the bound posits that if pi_t remains within a prescribed range [−Pi_max, Pi_max] over a forecasting horizon, then the instantaneous real GDP growth rate g_t is limited by a function g_t ≤ F(pi_max, model parameters). The exact form of F depends on the underlying model, such as a DSGE or growth‑accounting framework, and on calibration choices. GDPPibound is a conceptual construct used in theoretical work and some applied models; it does not represent a universally adopted empirical bound.
Applications and interpretation: GDPPibound is used as a consistency check in macroeconomic forecasts and policy simulations.
Implementation: Practitioners specify Pi_max based on historical inflation outcomes or target ranges, then compute the corresponding
Limitations: As a theoretical construct, GDPPibound relies on simplifying assumptions about the relationship between real activity
See also: GDP, inflation, price level, macroeconomic model, growth accounting, DSGE.