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Canada's Potential Growth

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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.

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Bibliographic Info

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

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

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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

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Cited by:
  1. 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.
  2. Romain Bouis & Ane Kathrine Christensen & Boris Cournède, 2013. "Deleveraging: Challenges, Progress and Policies," OECD Economics Department Working Papers 1077, OECD Publishing.

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