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Tracking the Slowdown in Long-Run GDP Growth

Author

Listed:
  • Juan Antolin-Diaz

    (Fulcrum Asset Management)

  • Thomas Drechsel

    (LSE)

  • Ivan Petrella

    (Warwick Business School and CEPR, University of Warwick)

Abstract

Using a dynamic factor model that allows for changes in both the long-run growth rate of output and the volatility of business cycles, we document a significant decline in long-run output growth in the United States. Our evidence supports the view that most of this slowdown occurred prior to the Great Recession. We show how to use the model to decompose changes in long-run growth into its underlying drivers. At low frequencies, a decline in the growth rate of labor productivity appears to be behind the recent slowdown in GDP growth for both the United States and other advanced economies. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.

Suggested Citation

  • Juan Antolin-Diaz & Thomas Drechsel & Ivan Petrella, 2017. "Tracking the Slowdown in Long-Run GDP Growth," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 343-356, May.
    • Handle: RePEc:tpr:restat:v:99:y:2017:i:2:p:343-356
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00646
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    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
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; 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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