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Identifying the Sources of the Slowdown in Growth: Demand vs. Supply

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  • Nicolo Maffei-Faccioli

Abstract

This paper proposes an empirical approach to identify the structural forces behind the recent slowdown in US GDP growth. I use time series techniques to extract low-frequency fluctuations in GDP growth and inflation and identify their underlying drivers: demand and supply. Identification is achieved with a set of sign restrictions. While supply-side factors account entirely for the slowdown in trend GDP growth during the 1970s and its acceleration in the 1990s, ``super-hysteresis" effects explain half of its decline since 2000. Overall, this paper establishes an important role of demand factors as drivers of long-run GDP growth.

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  • Nicolo Maffei-Faccioli, 2020. "Identifying the Sources of the Slowdown in Growth: Demand vs. Supply," 2020 Papers pma2978, Job Market Papers.
    • Handle: RePEc:jmp:jm2020:pma2978
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    3. Francesco Furlanetto & Ørjan Robstad & Pål Ulvedal & Antoine Lepetit, 2020. "Estimating hysteresis effects," Working Paper 2020/13, Norges Bank.

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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