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The Impact of COVID on Potential Output

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  • John G. Fernald
  • Huiyu Li

Abstract

The level of potential output is likely to be subdued post-COVID relative to its previous estimates. Most clearly, capital input and full-employment labor will both be lower than they previously were. Quantitatively, however, these effects appear relatively modest. In the long run, labor scarring could lead to lower levels of employment, but the slow pre-recession pace of GDP growth is unlikely to be substantially affected.

Suggested Citation

  • John G. Fernald & Huiyu Li, 2021. "The Impact of COVID on Potential Output," Working Paper Series 2021-09, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:90309
    DOI: 10.24148/wp2021-09
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    References listed on IDEAS

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    More about this item

    Keywords

    Growth accounting; productivity; potential output; covid-19;
    All these keywords.

    JEL classification:

    • 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
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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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