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An estimate of the potential growth of the Spanish economy


  • Pablo Hernández de Cos

    () (Banco de España)

  • Mario Izquierdo

    () (Banco de España)

  • Alberto Urtasun

    () (Banco de España)


This paper seeks to estimate the potential output of the Spanish economy, using the production function methodology standard in the literature. According to these estimates, the growth of the potential output of the Spanish economy stood at around 3% in the period 2000-2007, owing to the marked increase in the population and in the participation rate and the fall in structural unemployment, as well as vigorous capital accumulation. The contribution of these factors to potential output was reduced by the negative evolution of total factor productivity. In addition, the economic crisis is estimated to have had a significant negative impact on potential output, which has primarily taken the form of a large increase in structural unemployment, a sharp slowdown in population growth, as a consequence of the loss of momentum in immigrant inflows, and a reduction in the contribution of the capital stock resulting from the impact of the crisis on investment. As a result, the potential growth of the Spanish economy stands at around 1% during the crisis years and in the years immediately thereafter, insofar as some of these negative effects take place with a certain time lag. Lastly, in the medium term, the potential output of the economy is estimated to recover progressively, once the effects of the crisis have disappeared, reaching growth rates about 2%, against a background of negative rates of change in the population of age 16-64, a smooth improvement in the NAIRU, a slight recovery in investment and a higher contribution from TFP. The application of a strong process of structural reforms could, however, significantly improve the growth prospects of our economy.

Suggested Citation

  • Pablo Hernández de Cos & Mario Izquierdo & Alberto Urtasun, 2011. "An estimate of the potential growth of the Spanish economy," Occasional Papers 1104, Banco de España;Occasional Papers Homepage.
  • Handle: RePEc:bde:opaper:1104

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    References listed on IDEAS

    1. Sarai Criado & Adrian van Rixtel, 2008. "Structured finance and the financial turmoil of 2007-2008: and introductory overview," Occasional Papers 0808, Banco de España;Occasional Papers Homepage.
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    Cited by:

    1. Eloísa Ortega & Juan Peñalosa, 2013. "Some Thoughts On The Spanish Economy After Five Years Of Crisis," Occasional Papers 1304, Banco de España;Occasional Papers Homepage.
    2. Daniel Fuentes Castro, 2013. "An international comparison of the impact of the 2008 crisis on productivity," Applied Economics Letters, Taylor & Francis Journals, vol. 20(13), pages 1263-1269, September.
    3. Francisco Martí & Javier J. Pérez, 2015. "Spanish Public Finances through the Financial Crisis," Fiscal Studies, Institute for Fiscal Studies, vol. 36, pages 527-554, December.

    More about this item


    Potential output; output gap; Spain;

    JEL classification:

    • 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

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