IDEAS home Printed from https://ideas.repec.org/p/bca/bocadp/20-10.html
   My bibliography  Save this paper

Assessing Global Potential Output Growth: October 2020

Author

Listed:
  • Xin Scott Chen
  • Ali Jaffery
  • Guillaume Nolin
  • Karim Salhab
  • Peter Shannon
  • Subrata Sarker

Abstract

This paper presents updated estimates of potential output growth for the global economy through 2022. Global potential output growth is expected to decline sharply in the aftermath of the COVID-19 pandemic and recover partially by the end of the projection horizon of the October 2020 Monetary Policy Report. More specifically, global potential output growth is expected to decline from 3.3 percent in 2019 to 2.1 percent in 2020 and then recover gradually to 2.7 percent by 2022. While growth is expected to decline in all regions, the negative effects of COVID-19 on trend labour productivity growth in emerging market economies are the largest contributor to the overall expected slowdown in global growth. This also reflects Bank of Canada staff’s assessments of ongoing headwinds from aging, trade tensions and structurally low trend total factor productivity growth across all regions. A partial recovery in all regions is expected to be driven mainly by the gradual recovery in trend total factor productivity growth and trend labour input growth. In the US, potential output growth is expected to decline sharply in 2020, mostly due to a decline in the trend participation rate and a reduction in the growth rate of immigration. By 2022, US potential output growth is expected to partially recover due to an improvement in trend total factor productivity growth and a modest recovery in trend labour input growth.

Suggested Citation

  • Xin Scott Chen & Ali Jaffery & Guillaume Nolin & Karim Salhab & Peter Shannon & Subrata Sarker, 2020. "Assessing Global Potential Output Growth: October 2020," Discussion Papers 2020-10, Bank of Canada.
    • Handle: RePEc:bca:bocadp:20-10
    as

    Download full text from publisher

    File URL: https://www.bankofcanada.ca/2020/11/staff-discussion-paper-2020-10/
    File Function: Abstract
    Download Restriction: no
    File URL: https://www.bankofcanada.ca/wp-content/uploads/2020/11/sdp2020-10.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lucia Foster & Cheryl Grim & John Haltiwanger, 2016. "Reallocation in the Great Recession: Cleansing or Not?," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 293-331.
    2. Richard K. Crump & Stefano Eusepi & Marc Giannoni & Aysegul Sahin, 2019. "A Unified Approach to Measuring u," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 50(1 (Spring), pages 143-238.
    3. Victoria Gregory & Guido Menzio & David Wiczer, 2020. "Pandemic Recession: L- or V-Shaped?," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 40(01), pages 1-31, May.
    4. Ryan A. Decker & John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2017. "Declining Dynamism, Allocative Efficiency, and the Productivity Slowdown," American Economic Review, American Economic Association, vol. 107(5), pages 322-326, May.
    5. Nicholas Bloom & James Liang & John Roberts & Zhichun Jenny Ying, 2015. "Does Working from Home Work? Evidence from a Chinese Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(1), pages 165-218.
    6. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2020. "COVID-19 Is Also a Reallocation Shock," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(2 (Summer), pages 329-383.
    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


    Cited by:

    1. James Bootsma & Thomas J. Carter & Xin Scott Chen & Christopher Hajzler & Argyn Toktamyssov, 2020. "2020 US Neutral Rate Assessment," Discussion Papers 2020-12, Bank of Canada.
    2. Salma Ahmed & Aviel Avshalumov & Tania Chaar & Eshini Ekanayake & Helen Lao & Louis Poirier & Jenna Rolland-Mills & Argyn Toktamyssov & Lin Xiang, 2023. "Assessing global potential output growth and the US neutral rate: April 2023," Staff Analytical Notes 2023-5, Bank of Canada.
    3. Kyle Boutilier & Thomas J. Carter & Xin Scott Chen & Eshini Ekanayake & Louis Poirier & Peter Shannon & Akash Uppal & Lin Xiang, 2022. "Assessing global potential output growth and the US neutral rate: April 2022," Staff Analytical Notes 2022-4, Bank of Canada.
    4. Dany Brouillette & Julien Champagne & Julien McDonald-Guimond, 2020. "Potential output in Canada: 2020 reassessment," Staff Analytical Notes 2020-25, Bank of Canada.
    5. Thomas J. Carter & Xin Scott Chen & Ali Jaffery & Christopher Hajzler & Jonathan Lachaine & Peter Shannon & Subrata Sarker & Graeme Westwood & Beiling Yan, 2021. "Assessing global potential output growth and the US neutral rate: April 2021," Staff Analytical Notes 2021-5, Bank of Canada.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abel Brodeur & David Gray & Anik Islam & Suraiya Bhuiyan, 2021. "A literature review of the economics of COVID‐19," Journal of Economic Surveys, Wiley Blackwell, vol. 35(4), pages 1007-1044, September.
    2. Jose Maria Barrero & Nicholas Bloom & Steven J. Davis, 2020. "Why Working From Home Will Stick," Working Papers 2020-174, Becker Friedman Institute for Research In Economics.
    3. Bloom, Nicholas & Davis, Steven J. & Hansen, Stephen & Lambert, Peter John & Sadun, Raffaella & Taska, Bledi, 2023. "Remote work across jobs, companies and space," LSE Research Online Documents on Economics 121302, London School of Economics and Political Science, LSE Library.
    4. John (Jianqiu) Bai & Erik Brynjolfsson & Wang Jin & Sebastian Steffen & Chi Wan, 2021. "Digital Resilience: How Work-From-Home Feasibility Affects Firm Performance," NBER Working Papers 28588, National Bureau of Economic Research, Inc.
    5. J. David Brown & Gustavo A. Crespi & Leonardo Iacovone & Luca Marcolin, 2018. "Decomposing firm-level productivity growth and assessing its determinants: evidence from the Americas," The Journal of Technology Transfer, Springer, vol. 43(6), pages 1571-1606, December.
    6. Ravenna, Federico & Walsh, Carl, 2020. "Worker heterogeneity, selection, and employment dynamics in the face of aggregate demand and pandemic shocks," CEPR Discussion Papers 15043, C.E.P.R. Discussion Papers.
    7. Alexander Bick & Adam Blandin, 2023. "Employer Reallocation During the COVID-19 Pandemic: Validation and Application of a Do-It-Yourself CPS," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 49, pages 58-76, July.
    8. Kozeniauskas, Nicholas & Moreira, Pedro & Santos, Cezar, 2022. "On the cleansing effect of recessions and government policy: Evidence from Covid-19," European Economic Review, Elsevier, vol. 144(C).
    9. Erdsiek, Daniel, 2021. "Working from home during COVID-19 and beyond: Survey evidence from employers," ZEW Discussion Papers 21-051, ZEW - Leibniz Centre for European Economic Research.
    10. Morikawa, Masayuki, 2021. "Productivity of firms using relief policies during the COVID-19 crisis," Economics Letters, Elsevier, vol. 203(C).
    11. Tomaz Cajner & Leland D. Crane & Ryan A. Decker & John Grigsby & Adrian Hamins-Puertolas & Erik Hurst & Christopher Kurz & Ahu Yildirmaz, 2020. "The US Labor Market during the Beginning of the Pandemic Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 51(2 (Summer), pages 3-33.
    12. Bruhn, Simon & Grebel, Thomas, 2023. "Allocative efficiency, plant dynamics and regional productivity: Evidence from Germany," Ilmenau Economics Discussion Papers 172, Ilmenau University of Technology, Institute of Economics.
    13. Daniel A. Dias & Carlos Robalo Marques, 2021. "From micro to macro: a note on the analysis of aggregate productivity dynamics using firm-level data," Journal of Productivity Analysis, Springer, vol. 56(1), pages 1-14, August.
    14. Weche John P. & Wambach Achim, 2021. "The Fall and Rise of Market Power in Europe," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 241(5-6), pages 555-575, November.
    15. Hall, Robert E. & Kudlyak, Marianna, 2022. "The inexorable recoveries of unemployment," Journal of Monetary Economics, Elsevier, vol. 131(C), pages 15-25.
    16. David Florian Hoyle & Johanna L. Francis, 2019. "Lending frictions and nominal rigidities: Implications for credit reallocation and TFP," Working Papers 142, Peruvian Economic Association.
    17. Jeroen Van den bosch & Stijn Vanormelingen, 2023. "Productivity growth over the business cycle: cleansing effects of recessions," Small Business Economics, Springer, vol. 60(2), pages 639-657, February.
    18. Alistair Dieppe, 2021. "Global Productivity," World Bank Publications - Books, The World Bank Group, number 34015.
    19. Dan Andrews & Filippos Petroulakis, 2017. "Breaking the Shackles: Zombie Firms, Weak Banks and Depressed Restructuring in Europe," OECD Economics Department Working Papers 1433, OECD Publishing.
    20. Forsythe, Eliza & Kahn, Lisa B. & Lange, Fabian & Wiczer, David, 2022. "Where have all the workers gone? Recalls, retirements, and reallocation in the COVID recovery," Labour Economics, Elsevier, vol. 78(C).

    More about this item

    Keywords

    Potential output; Productivity;

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bca:bocadp:20-10. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/bocgvca.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.