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Subdued potential growth: Sources and remedies

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  • Sinem Kilic Celik
  • M.Ayhan Kose
  • Franziska L. Ohnsorge

Abstract

Global potential output growth has been flagging. At 2.5 percent in 2013-17, post-crisis potential growth is 0.5 percentage point below its longer-term average and 0.9 percentage point below its average a decade ago. Compared with a decade ago, potential growth has declined 0.8 percentage point in advanced economies and 1.1 percentage point in emerging market and developing economies. The slowdown mainly reflected weaker capital accumulation but is also evidence of decelerating productivity growth and demographic trends that dampen labor supply growth. Unless countered, these forces are expected to continue and to depress global potential growth further by 0.2 percentage point over the next decade. A menu of policy options is available to help reverse this trend, including comprehensive policy initiatives to lift physical and human capital and to encourage labor force participation by women and older workers.

Suggested Citation

  • Sinem Kilic Celik & M.Ayhan Kose & Franziska L. Ohnsorge, 2020. "Subdued potential growth: Sources and remedies," CAMA Working Papers 2020-24, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2020-24
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    3. Isaac K. Ofori, 2021. "Towards Building Shared Prosperity in Sub-Saharan Africa: How Does the Effect of Economic Integration Compare to Social Equity Policies?," Working Papers of the African Governance and Development Institute. 21/045, African Governance and Development Institute..
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    5. Isaac K. Ofori & William G. Cantah & Benedict Afful & Saddam Hossain, 2022. "Towards shared prosperity in sub‐Saharan Africa: How does the effect of economic integration compare to social equity policies?," African Development Review, African Development Bank, vol. 34(1), pages 97-113, March.
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    More about this item

    Keywords

    Potential growth; potential output; advanced economies; emerging market and developing economies;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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