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Potential output growth in several industrialised countries: a comparison

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Author Info
Christophe Cahn () (Corresponding author: Banque de France, DAMEP, 31 rue Croix des Petits Champs, 75049 Paris Cedex, France.)
Arthur Saint-Guilhem () (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)

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Abstract

In this paper, we present international comparisons of potential output growth among several economies — Canada, the euro area, France, Germany, Italy, Japan, the Netherlands, the United Kingdom, and the United States — for the period 1991-2004. The main estimates rely on a structural approach where output of the whole economy is described by a Cobb-Douglas function. This framework enables us to take temporal considerations into account, depending on the assumed volatility of potential output. Moreover, this study presents two original features, in other words, the construction of consistent and homogenous capital stock series, and long-run estimates including capital-deepening effects based on a stable capital/output ratio in value terms, whereas standard estimations assume a stable ratio in volume terms. Lastly, we use univariate methods as a benchmark. Even though the final estimates are obviously sensitive to each method and the assumptions made for each of them, this paper might help to understand why some economies remained below their potential growth rate during the recent period by identifying the sources of long-run potential. JEL Classification: C51, E32, O11, O47.

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Paper provided by European Central Bank in its series Working Paper Series with number 828.

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Length: 57 pages
Date of creation: Nov 2007
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Handle: RePEc:ecb:ecbwps:20070828

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Related research
Keywords: potential growth; production function; total factor productivity; age of equipments.;

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  1. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD, Economics Department. [Downloadable!]
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  3. Dale W. Jorgenson & Khuong Vu, 2005. "Information Technology and the World Economy," Scandinavian Journal of Economics, Blackwell Publishing, vol. 107(4), pages 631-650, December. [Downloadable!] (restricted)
  4. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2003. "Regulation and Investment," OECD Economics Department Working Papers 352, OECD, Economics Department. [Downloadable!]
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  5. Baghli, M. & Cahn, C. & Villetelle, J-P., 2006. "Estimating Potential Output with a Production Function for France, Germany and Italy," Documents de Travail 146, Banque de France. [Downloadable!]
  6. Dale W. Jorgenson & Khuong Vu, 2005. "Information technology and the world economy," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
  7. Stephen D. Oliner & Daniel E. Sichel, 2002. "Information technology and productivity: where are we now and where are we going?," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 15-44. [Downloadable!]
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  8. Daron Acemoglu & Philippe Aghion & Fabrizio Zilibotti, 2006. "Distance to Frontier, Selection, and Economic Growth," Journal of the European Economic Association, MIT Press, vol. 4(1), pages 37-74, 03. [Downloadable!] (restricted)
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  9. Cette, Gilbert & Mairesse, Jacques & Kocoglu, Yusuf, 2005. "ICT diffusion and potential output growth," Economics Letters, Elsevier, vol. 87(2), pages 231-234, May. [Downloadable!] (restricted)
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  1. Matthieu Lemoine & Gian Luigi Mazzi & Paola Monperrus-Veroni & Frédéric Reynes, 2008. "Real time estimation of potential output and output gap for the euro-area: comparing production function with unobserved components and SVAR approaches," Documents de Travail de l'OFCE 2008-34, Observatoire Francais des Conjonctures Economiques (OFCE). [Downloadable!]
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