IDEAS home Printed from https://ideas.repec.org/p/uta/papers/2017_03.html
   My bibliography  Save this paper

Is Potential Output Growth Falling?

Author

Listed:
  • Ivan Mendieta-Muñoz

Abstract

We document differences between the evolution of a measure of potential output growth and the evolution of a measure of potential output per capita growth using time-varying parameter models estimated for four advanced economies (Canada, Germany, the United Kingdom and the United States). The evidence supports the view that most of the slowdown in potential output growth occurred prior to the Great Recession. However, the potential output per capita growth rate: 1) remained relatively constant in Canada; and 2) decreased less (more) than the potential output growth rate in Germany and the United States (in the United Kingdom). These results indicate that: 1) the decline in potential output growth in Canada is mainly associated with the decrease in population growth; and 2) the decrease in population growth is an important factor in order to explain the decline in potential output in Germany and the United States, but not in the United Kingdom.

Suggested Citation

  • Ivan Mendieta-Muñoz, 2017. "Is Potential Output Growth Falling?," Working Paper Series, Department of Economics, University of Utah 2017_03, University of Utah, Department of Economics.
  • Handle: RePEc:uta:papers:2017_03
    as

    Download full text from publisher

    File URL: http://economics.utah.edu/research/publications/2017_03.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Benati, Luca, 2007. "Drift and breaks in labor productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2847-2877, August.
    2. Huang, Ho-Chuan (River) & Lin, Shu-Chin, 2008. "Smooth-time-varying Okun's coefficients," Economic Modelling, Elsevier, vol. 25(2), pages 363-375, March.
    3. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
    4. Gauti B. Eggertsson & Neil R. Mehrotra, 2014. "A Model of Secular Stagnation," NBER Working Papers 20574, National Bureau of Economic Research, Inc.
    5. Klump, Rainer & McAdam, Peter & Willman, Alpo, 2008. "Unwrapping some euro area growth puzzles: Factor substitution, productivity and unemployment," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 645-666, June.
    6. repec:cup:macdyn:v:21:y:2017:i:04:p:982-1022_00 is not listed on IDEAS
    7. Robert J. Gordon, 2014. "A New Method of Estimating Potential Real GDP Growth: Implications for the Labor Market and the Debt/GDP Ratio," NBER Working Papers 20423, National Bureau of Economic Research, Inc.
    8. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-457, March.
    9. Fernald, John G. & Wang, Bing, 2015. "The recent rise and fall of rapid productivity growth," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    10. John G. Fernald, 2015. "Productivity and Potential Output before, during, and after the Great Recession," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 1-51.
    11. James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-09 Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(1 (Spring), pages 81-156.
    12. Jordi Galí & Frank Smets & Rafael Wouters, 2012. "Slow Recoveries: A Structural Interpretation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 9-30, December.
    13. Miguel A. LeÛn-Ledesma & A. P. Thirlwall, 2002. "The endogeneity of the natural rate of growth," Cambridge Journal of Economics, Oxford University Press, vol. 26(4), pages 441-459, July.
    14. Robert J. GORDON, 2015. "Secular Stagnation on the Supply Side: U.S. Producivity Growth in the Long Run," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(100), pages 19-45, 4th quart.
    15. Kim, Chang-Jin & Nelson, Charles R., 2006. "Estimation of a forward-looking monetary policy rule: A time-varying parameter model using ex post data," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1949-1966, November.
    16. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
    17. Benati, Luca, 2007. "Drift and breaks in labor productivity," Working Paper Series 718, European Central Bank.
    18. Mendieta-Muñoz, Ivan, 2017. "On The Interaction Between Economic Growth And Business Cycles," Macroeconomic Dynamics, Cambridge University Press, vol. 21(04), pages 982-1022, June.
    19. Martin, Robert & Munyan, Tenyanna & Wilson, Beth Anne, 2015. "Potential Output and Recessions: Are We Fooling Ourselves?," International Finance Discussion Papers 1145, Board of Governors of the Federal Reserve System (U.S.).
    20. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    21. Robert J. Gordon, 2013. "U.S. Productivity Growth: The Slowdown Has Returned After a Temporary Revival," International Productivity Monitor, Centre for the Study of Living Standards, vol. 25, pages 13-19, Spring.
    22. Juan Antolin-Diaz & Thomas Drechsel & Ivan Petrella, 2017. "Tracking the Slowdown in Long-Run GDP Growth," The Review of Economics and Statistics, MIT Press, vol. 99(2), pages 343-356, May.
    23. Robert J. Gordon, 2012. "Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds," NBER Working Papers 18315, National Bureau of Economic Research, Inc.
    24. Matteo Lanzafame, 2010. "The endogeneity of the natural rate of growth in the regions of Italy," International Review of Applied Economics, Taylor & Francis Journals, vol. 24(5), pages 533-552.
    25. Kenneth J. Arrow, 1962. "The Economic Implications of Learning by Doing," Review of Economic Studies, Oxford University Press, vol. 29(3), pages 155-173.
    26. Fernald, John G., 2007. "Trend breaks, long-run restrictions, and contractionary technology improvements," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2467-2485, November.
    27. Kim, Chang-Jin, 2006. "Time-varying parameter models with endogenous regressors," Economics Letters, Elsevier, vol. 91(1), pages 21-26, April.
    28. Harrod, Roy, 1970. "Harrod after Twenty-one Years: A Comment," Economic Journal, Royal Economic Society, vol. 80(319), pages 737-741, September.
    29. Miguel A. León-Ledesma & Matteo Lanzafame, 2010. "The Endogenous Nature of the ‘Natural’ Rate of Growth," Chapters,in: Handbook of Alternative Theories of Economic Growth, chapter 10 Edward Elgar Publishing.
    30. James H. Stock & Mark W. Watson, 2012. "Disentangling the Channels of the 2007-09 Recession," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(1 (Spring), pages 81-156.
    31. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, January.
    32. Sweta Chaman Saxena & Valerie Cerra, 2000. "Alternative Methods of Estimating Potential Output and the Output Gap; An Application to Sweden," IMF Working Papers 00/59, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Potential output growth rate; Potential output per capita growth rate; Rates of growth consistent with a constant unemployment rate JEL Classification: O41; O47;

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other

    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:uta:papers:2017_03. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/deuutus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.