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Revisions of potential output estimates in the EU after the Great Recession

Using European Commission real-time data, we show that potential output (PO) estimates were substantially and persistently revised downwards after the Great Recession. We decompose PO revisions into revisions of the capital stock, trend labor, and trend total-factor productivity (TFP). Initially, tr...

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Bibliographic Details
Main Authors: Dovern, Jonas (Author) , Zuber, Christopher (Author)
Format: Book/Monograph Working Paper
Language:English
Published: Munich, Germany CESifo, Center for Economic Studies & Ifo Institute [2019]
Series:CESifo working paper Category 6, Fiscal policy, macroeconomics and growth no. 7681 (May 2019)
In: CESifo working papers (no. 7681 (May 2019))

Subjects:
Graue Literatur
Online Access:Resolving-System, kostenfrei, Volltext: http://hdl.handle.net/10419/201907
Verlag, kostenfrei, Volltext: https://www.cesifo.org/en/publikationen/2019/working-paper/revisions-potential-output-estimates-eu-after-great-recession
Verlag, kostenfrei, Volltext: https://www.cesifo.org/DocDL/cesifo1_wp7681.pdf
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Author Notes:Jonas Dovern, Christopher Zuber
Description
Summary:Using European Commission real-time data, we show that potential output (PO) estimates were substantially and persistently revised downwards after the Great Recession. We decompose PO revisions into revisions of the capital stock, trend labor, and trend total-factor productivity (TFP). Initially, trend TFP revisions contribute most to the overall PO revisions while all three components are almost equally important in the longer run. Revisions of the capital stock happen quickly while revisions of trend labor, mainly driven by revisions of the non-accelerating wage rate of unemployment (NAWRU), are made gradually. The relative contributions of the components to overall PO revisions differ systematically across countries. This suggests that heterogeneous policies are needed to push different countries back to their previous growth paths.
Physical Description:Online Resource

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