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Steady-state growth

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  • Emanuel Kohlscheen
  • Jouchi Nakajima

Abstract

We compute steady-state economic growth - defined as the rate of growth that the economy would converge to in the absence of new shocks. This rate can be computed in real-time by means of a parsimonious time-varying parameter (TVP) VAR model. Our procedure offers a relatively agnostic estimation of benchmark equilibrium growth rates. Estimates show that the steady-state GDP growth rate in the case of the United States declined from just above 3% per year in the 1990s to 2.4% at present. Results for other six advanced economies and the euro area indicate that the steady-state growth rate, which is consistent with stable inflation and financial conditions, has been relatively stable since 2010 in most cases in spite of a recent slowdown in actual GDP growth rates.

Suggested Citation

  • Emanuel Kohlscheen & Jouchi Nakajima, 2019. "Steady-state growth," BIS Working Papers 812, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:812
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    References listed on IDEAS

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    More about this item

    Keywords

    economic growth; financial conditions; inflation; monetary policy; potential output; time-varying;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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