Advanced Search
MyIDEAS: Login to save this paper or follow this series

Canada's Potential Growth

Contents:

Author Info

  • Marcello M. Estevão
  • Evridiki Tsounta

Abstract

This study investigates the impact of the current financial crisis on Canada''s potential GDP growth. Using a simple accounting framework to decompose trend GDP growth into changes in capital, labor services and total factor productivity, we find a sizeable drop in Canadian potential growth in the short term. The estimated decline of about 1 percentage point originates from a sharply decelerating capital stock accumulation (as investment has dropped steeply) and a rising long-term unemployment rate (which would raise equilibrium unemployment rates). However, over the medium term, we expect Canada''s potential GDP growth to gradually rise to around 2 percent, below the pre-crisis growth rate, mostly reflecting the effects of population aging and a secular decline in average working hours.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=23531
Download Restriction: no

Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/13.

as in new window
Length: 29
Date of creation: 01 Jan 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/13

Contact details of provider:
Postal: International Monetary Fund, Washington, DC USA
Phone: (202) 623-7000
Fax: (202) 623-4661
Email:
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC

Order Information:
Web: http://www.imf.org/external/pubs/pubs/ord_info.htm

Related research

Keywords: Labor productivity; Capital accumulation; Economic growth; Global Financial Crisis 2008-2009; Gross domestic product; Unemployment; Canada; potential growth; nairu; labor force participation; labor force participation rate; unemployment rate; structural unemployment; labor productivity growth; labor market; rate of unemployment; unemployment rates; unemployment insurance; non-accelerating inflation rate of unemployment; equilibrium unemployment rates; labor force survey; labor market policies; long-term unemployment; female labor force; unemployment insurance system; labor markets; jobs; labor share; average unemployment; female labor force participation; civilian unemployment; labor participation; labour; high unemployment rates; duration of unemployment; employment patterns; effects of unemployment; labor market flexibility; long-term unemployment rate; labour force participation; decline in unemployment; flexible labor markets; labor compensation; total employment; natural rate of unemployment; labor market performance;

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pierre Fortin, 2000. "Macroeconomic Unemployment and Structural Unemployment," Canadian Public Policy, University of Toronto Press, vol. 26(s1), pages 125-130, July.
  2. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," American Economic Review, American Economic Association, vol. 99(2), pages 466-72, May.
  4. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
  5. Mario Fortin & Pierre Fortin, 1999. "The Changing Labour Force Participation of Canadians, 1969-96: Evidence from a Panel of Six Demographic Groups," A Symposium on Canadian Labour Force Participation in the 1990s (Special Issue of Canadian Business Economics, Volume 7, Number 2, May 1999), in: Andrew Sharpe & Louis Grignon (ed.), A Symposium on Canadian Labour Force Participation in the 1990s (Special Issue of Canadian Business Economics, Volume 7, Number 2, May 1999), pages 12-24 Centre for the Study of Living Standards.
  6. Arthur M. Okun, 1973. "Upward Mobility in a High-Pressure Economy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(1), pages 207-262.
  7. Wesseling, H. L., 2000. "An introduction," European Review, Cambridge University Press, vol. 8(01), pages 55-57, February.
  8. Evridiki Tsounta, 2006. "Why Are Women Working so Much More in Canada? An International Perspective," IMF Working Papers 06/92, International Monetary Fund.
  9. David Haugh & Patrice Ollivaud & David Turner, 2009. "The Macroeconomic Consequences of Banking Crises in OECD Countries," OECD Economics Department Working Papers 683, OECD Publishing.
  10. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
  11. Guy Debelle & James Vickery, 1998. "The Macroeconomics of Australian Unemployment," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
  12. Setterfield, M. A. & Gordon, D. V. & Osberg, L., 1992. "Searching for a will o' the wisp : An empirical study of the NAIRU in Canada," European Economic Review, Elsevier, vol. 36(1), pages 119-136, January.
  13. Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
  14. Someshwar Rao & Andrew Sharpe & Jeremy Smith, 2005. "An Analysis of the Labour Productivity Growth Slowdown in Canada since 2000," International Productivity Monitor, Centre for the Study of Living Standards, vol. 10, pages 3-23, Spring.
  15. Andrew Sharpe & Jean-Francois Arsenault, 2009. "New Estimates of Multifactor Productivity Growth for the Canadian Provinces," International Productivity Monitor, Centre for the Study of Living Standards, vol. 18, pages 25-37, Spring.
  16. Dirk Pilat, 2005. "Canada's Productivity Performance in International Perspective," International Productivity Monitor, Centre for the Study of Living Standards, vol. 10, pages 24-44, Spring.
  17. Andrew Sharpe & Timothy C. Sargent, 2000. "Structural Aspects of Unemployment in Canada: Introduction and Overview," Canadian Public Policy, University of Toronto Press, vol. 26(s1), pages 1-5, July.
  18. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  19. M. Ayhan Kose & Roberto Cardarelli, 2004. "Economic Integration, Business Cycle, and Productivity in North America," IMF Working Papers 04/138, International Monetary Fund.
  20. Andrew Sharpe & Jean-Francois Arsenault & Peter Harrison, 2008. "Why Have Real Wages Lagged Labour Productivity Growth in Canada?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 16-27, Fall.
  21. Furceri, Davide & Mourougane, Annabelle, 2012. "The effect of financial crises on potential output: New empirical evidence from OECD countries," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 822-832.
  22. Baldwin, John R. & Harchaoui, Tarek, 2002. "Productivity Growth in Canada," Productivity Growth in Canada, Statistics Canada, Economic Analysis, number stcb6e, December.
  23. Joseph Stiglitz, 1997. "Reflections on the Natural Rate Hypothesis," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 3-10, Winter.
  24. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  25. Benoît Robidoux & Bing-Sun Wong, 2003. "Has Trend Productivity Growth Increased in Canada?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 6, pages 47-55, Spring.
  26. 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 Publishing.
  27. Reinhart, Carmen M. & Rogoff, Kenneth S., 2009. "The Aftermath of Financial Crises," Scholarly Articles 11129155, Harvard University Department of Economics.
  28. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
  29. Franco Modigliani & Lucas Papademos, 1975. "Targets for Monetary Policy in the Coming Year," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(1), pages 141-166.
  30. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  31. Ravi Balakrishnan, 2008. "Canadian Firm and Job Dynamics," IMF Working Papers 08/31, International Monetary Fund.
  32. Gu, Wulong & Baldwin, John R., 2009. "Productivity Performance in Canada, 1961 to 2008: An Update on Long-term Trends," The Canadian Productivity Review 2009025e, Statistics Canada, Economic Analysis.
  33. Someshwar Rao & Jianmin Tang & Weimin Wang, 2008. "What Explains the Canada-US Labour Productivity Gap?," Canadian Public Policy, University of Toronto Press, vol. 34(2), pages 163-192, June.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Davide Furceri & Annabelle Mourougane, 2009. "The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries," OECD Economics Department Working Papers 699, OECD Publishing.
  2. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers 1077, OECD Publishing.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:10/13. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow) or (Hassan Zaidi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.