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Canada's Potential Productivity and Output Growth: A Post-Crisis Assessment

Author

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  • Marcello Estevão
  • Evridiki Tsounta

Abstract

This study investigates the impact of the current financial crisis on Canada’s potential GDP growth. Using a simple accounting framework to decompose trend GDP growth into changes in capital, labour services, and total factor productivity, we find a sizeable drop in Canadian potential growth rate in the short term. The estimated decline of about 1 percentage point originates from a sharply decelerating capital stock accumulation (as investment has dropped steeply). However, over the medium term, we expect Canada’s potential GDP growth to gradually rise to around 2 per cent, below the pre-crisis growth rate, partly reflecting the effects of population aging.

Suggested Citation

  • Marcello Estevão & Evridiki Tsounta, 2010. "Canada's Potential Productivity and Output Growth: A Post-Crisis Assessment," International Productivity Monitor, Centre for the Study of Living Standards, vol. 20, pages 3-21, Fall.
    • Handle: RePEc:sls:ipmsls:v:20:y:2010:1
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    File URL: http://www.csls.ca/ipm/20/IPM-20-Estevao-Tsounta.pdf
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    References listed on IDEAS

    as
    1. International Monetary Fund, 2010. "United States: Selected Issues Paper," IMF Staff Country Reports 2010/248, International Monetary Fund.
    2. International Monetary Fund, 2008. "Portugal: Staff Report for the 2008 Article IV Consultation," IMF Staff Country Reports 2008/323, International Monetary Fund.
    3. Baldwin, John R. Harchaoui, Tarek, 2002. "Productivity Growth in Canada," Productivity Growth in Canada, Statistics Canada, Economic Analysis Division, number stcb6e, March.
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    Cited by:

    1. Don Drummond & Evan Capeluck & Matthew Calver, 2015. "The Key Challenge for Canadian Public Policy: Generating Inclusive and Sustainable Economic Growth," CSLS Research Reports 2015-11, Centre for the Study of Living Standards.
    2. Dorin Mantescu & Dan-Tudor Lazar, 2014. "Estimation of Potential GDP and output Gap. Comparative Perspective," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(37), pages 951-951, August.

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    More about this item

    Keywords

    productivity; potential output; growth; Canada;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; 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
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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