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Potential output and the neutral rate in Canada: 2023 assessment

Author

Listed:
  • Julien Champagne
  • Christopher Hajzler
  • Dmitry Matveev
  • Harlee Melinchuk
  • Antoine Poulin-Moore
  • Kemal Ozhan
  • Youngmin Park
  • Temel Taskin

Abstract

We expect that potential output growth will rebound from 1.4% in 2022 to 2.2% on average between 2023 and 2026. We revised down our estimates of growth over 2022–25 relative to the April 2022 assessment. The Canadian nominal neutral rate remains unchanged—in the range of 2% to 3%.

Suggested Citation

  • Julien Champagne & Christopher Hajzler & Dmitry Matveev & Harlee Melinchuk & Antoine Poulin-Moore & Kemal Ozhan & Youngmin Park & Temel Taskin, 2023. "Potential output and the neutral rate in Canada: 2023 assessment," Staff Analytical Notes 2023-6, Bank of Canada.
    • Handle: RePEc:bca:bocsan:23-6
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    References listed on IDEAS

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    2. Guyllaume Faucher & Christopher Hajzler & Martin Kuncl & Dmitry Matveev & Youngmin Park & Temel Taskin, 2022. "Potential output and the neutral rate in Canada: 2022 reassessment," Staff Analytical Notes 2022-3, Bank of Canada.
    3. Cristina Constantinescu & Aaditya Mattoo & Michele Ruta, 2020. "The Global Trade Slowdown: Cyclical or Structural?," The World Bank Economic Review, World Bank, vol. 34(1), pages 121-142.
    4. Thomas J. Carter & Xin Scott Chen & José Dorich, 2019. "The Neutral Rate in Canada: 2019 Update," Staff Analytical Notes 2019-11, Bank of Canada.
    5. Laurence Ball, 2014. "Long-term damage from the Great Recession in OECD countries," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 149-160, September.
    6. Christine Arriola & Charles Cadestin & Przemyslaw Kowalski & Joaquim José Martins Guilhoto & Sébastien Miroudot & Frank van Tongeren, 2023. "Challenges to international trade and the global economy: Recovery from COVID-19 and Russia’s war of aggression against Ukraine," OECD Trade Policy Papers 265, OECD Publishing.
    7. Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, vol. 40(1), pages 15-32, January.
    8. Russell Barnett, 2007. "Trend Labour Supply in Canada: Implications of Demographic Shifts and the Increasing Labour Force Attachment of Women," Bank of Canada Review, Bank of Canada, vol. 2007(Summer), pages 5-18.
    9. Salma Ahmed & Aviel Avshalumov & Tania Chaar & Eshini Ekanayake & Helen Lao & Louis Poirier & Jenna Rolland-Mills & Argyn Toktamyssov & Lin Xiang, 2023. "Assessing global potential output growth and the US neutral rate: April 2023," Staff Analytical Notes 2023-5, Bank of Canada.
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    Cited by:

    1. Erik Ens & Kurt See & Corinne Luu, 2023. "Benchmarks for assessing labour market health: 2023 update," Staff Analytical Notes 2023-7, Bank of Canada.
    2. Panagiotis Bouras & Joaquín Saldain & Xing Guo & Thomas Michael Pugh & Maria teNyenhuis, 2024. "Impacts of interest rate hikes on the consumption of households with a mortgage," Staff Analytical Notes 2024-14, Bank of Canada.
    3. Marc-André Gosselin & Sharon Kozicki, 2023. "Making It Real: Bringing Research Models into Central Bank Projections," Discussion Papers 2023-29, Bank of Canada.

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    More about this item

    Keywords

    Economic models; Interest rates; Labour markets; Monetary policy; Potential output; Productivity.;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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