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Reassessing Longer-Run U.S. Growth: How Low?

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  • John G. Fernald

Abstract

What is the sustainable pace of GDP growth in the United States? A plausible point forecast is that GDP per capita will rise well under 1 percent per year in the longer run, with overall GDP growth of a little over 1-1/2 percent. The main drivers of slow growth are educational attainment and demographics. First, rising educational attainment will add less to productivity growth than it did historically. Second, because of the aging (and retirements) of baby boomers, employment will rise more slowly than population (which, in turn, is projected to rise slowly relative to history). This modest growth forecast assumes that productivity growth is relatively ?normal,? if modest?in line with its pace for most of the period since 1973. An upside risk is that we see another burst of information-technology-induced productivity growth similar to what we saw from 1995 to 2004.

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  • John G. Fernald, 2016. "Reassessing Longer-Run U.S. Growth: How Low?," Working Paper Series 2016-18, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfwp:2016-18
    DOI: 10.24148/wp2016-18
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    References listed on IDEAS

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    1. Inconvenient Facts
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2017-02-27 19:17:13

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    1. Holston, Kathryn & Laubach, Thomas & Williams, John C., 2017. "Measuring the natural rate of interest: International trends and determinants," Journal of International Economics, Elsevier, vol. 108(S1), pages 59-75.
    2. Jorgenson, Dale & Ho, Mun & Samuels, Jon, 2019. "Recent U.S. economic performance and prospects for future growth," Journal of Policy Modeling, Elsevier, vol. 41(3), pages 459-476.
    3. Alexopoulos, Michelle & Cohen, Jon, 2019. "Will the new technologies turn the page on U.S. productivity growth?," Economics Letters, Elsevier, vol. 175(C), pages 19-23.

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