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Potential output growth in several industrialised countries: a comparison

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  • Cahn, Christophe
  • Saint-Guilhem, Arthur

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 growth. JEL Classification: C51, E32, O11, O47

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0828.

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Date of creation: Nov 2007
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Handle: RePEc:ecb:ecbwps:20070828

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

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  1. Dale W. Jorgenson & Khuong Vu, 2005. "Information Technology and the World Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 631-650, December.
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  6. Maddison, Angus, 1994. "Standardised Estimates of Fixed Capital Stock: A Six Country Comparison," GGDC Research Memorandum 199409, Groningen Growth and Development Centre, University of Groningen.
  7. Cahn, Christophe & Saint-Guilhem, Arthur, 2007. "Potential output growth in several industrialised countries: a comparison," Working Paper Series 0828, European Central Bank.
  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.
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  12. Baghli, M. & Cahn, C. & Villetelle, J-P., 2006. "Estimating Potential Output with a Production Function for France, Germany and Italy," Working papers 146, Banque de France.
  13. Stephen D. Oliner & Daniel E. Sichel, 2002. "Information technology and productivity: where are we now and where are we going?," Finance and Economics Discussion Series 2002-29, Board of Governors of the Federal Reserve System (U.S.).
  14. Cette, Gilbert & Mairesse, Jacques & Kocoglu, Yusuf, 2005. "ICT diffusion and potential output growth," Economics Letters, Elsevier, vol. 87(2), pages 231-234, May.
  15. Aghion, Philippe & Askenazy, Philippe & Bourles, Renaud & Cette, Gilbert & Dromel, Nicolas, 2007. "Education supérieure, rigidités de marché et croissance," CEPREMAP Working Papers (Docweb) 0705, CEPREMAP.
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  18. Dale W. Jorgenson & Khuong Vu, 2005. "Information technology and the world economy," Proceedings, Federal Reserve Bank of San Francisco.
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Citations

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Cited by:
  1. Christophe Cahn & Arthur Saint-Guilhem, 2010. "Potential output growth in several industrialised countries a comparison," Empirical Economics, Springer, vol. 39(1), pages 139-165, August.
  2. Moisa, Altar & Necula, Ciprian & Bobeica, Gabriel, 2010. "Estimating Potential GDP for the Romanian Economy. An Eclectic Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-25, September.
  3. Gilbert Cette & Yusuf Kocoglu & Jacques Mairesse, 2009. "Productivity Growth and Levels in France, Japan, the United Kingdom and the United States in the Twentieth Century," NBER Working Papers 15577, National Bureau of Economic Research, Inc.
  4. Hjelm, Göran & Jönsson, Kristian, 2010. "In Search of a Method for Measuring the Output Gap of the Swedish Economy," Working Paper 115, National Institute of Economic Research.
  5. Oulton, Nicholas, 2012. "Long term implications of the ICT revolution: Applying the lessons of growth theory and growth accounting," Economic Modelling, Elsevier, vol. 29(5), pages 1722-1736.
  6. repec:hal:wpaper:halshs-00586632 is not listed on IDEAS
  7. Gian Luigi Mazzi & Frédéric Reynès & Matthieu Lemoine & Paola Veroni, 2008. "Real Time Estimation of Potential Output and Output Gap for the Euro-Area : Comparing Production Function with Unobserved Components and SVAR Approaches," Sciences Po publications 2008-34, Sciences Po.
  8. Moisa Altar & Ciprian Necula & Gabriel Bobeica, 2009. "A Robust Assessment of the Romanian Business Cycle," Advances in Economic and Financial Research - DOFIN Working Paper Series 28, Bucharest University of Economics, Center for Advanced Research in Finance and Banking - CARFIB.

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