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Should we still use the concept of potential growth ?

Author

Listed:
  • Catherine Mathieu

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Henri Sterdyniak

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

Abstract

The concepts of potential output level and growth survived the 2008 crisis and are still widely used in economic policy debates. The paperdiscusses thetheoretical foundations and empirical assessments of these concepts. Potential output may refer to different concepts, depending on the constraints taken into account. Potential output cannot be assessed without a complex macroeconomic analysis.The paper discusses recent empirical work on potential growth estimates,especially how they introduce a break in potential growth after the 2008 crisis, and how the methods used oftenjustify procyclical policies. For the future,the problem isnot a slowdown in potential growth butthe inability of developed economies,underglobalisation constraints, to reach afull-employment growth.

Suggested Citation

  • Catherine Mathieu & Henri Sterdyniak, 2015. "Should we still use the concept of potential growth ?," Working Papers hal-03459550, HAL.
    • Handle: RePEc:hal:wpaper:hal-03459550
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03459550
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    File URL: https://sciencespo.hal.science/hal-03459550/document
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    Cited by:

    1. repec:spo:wpmain:info:hdl:2441/pm9j25k5p9bc8fsjhn1ov51ca is not listed on IDEAS
    2. Nacho Alvarez & Catherine Mathieu & Henri Sterdyniak, 2019. "Towards a progressive EMU fiscal governance," SciencePo Working papers Main hal-03389337, HAL.
    3. Catherine Mathieu & Henri Sterdyniak, 2021. "Vers une réforme des règles budgétaires dans la zone euro ?," SciencePo Working papers Main hal-03474871, HAL.
    4. Catherine Mathieu & Henri Sterdyniak, 2022. "Towards New Fiscal Rules in the Euro Area?," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 57(1), pages 16-20, January.
    5. Catherine Mathieu & Henri Sterdyniak, 2019. "On public debt in the euro area," SciencePo Working papers Main hal-03403548, HAL.
    6. repec:hal:spmain:info:hdl:2441/6ii0ap3lau824p8g1q3n4jens3 is not listed on IDEAS
    7. repec:hal:spmain:info:hdl:2441/pm9j25k5p9bc8fsjhn1ov51ca is not listed on IDEAS
    8. repec:spo:wpmain:info:hdl:2441/6ii0ap3lau824p8g1q3n4jens3 is not listed on IDEAS

    More about this item

    Keywords

    potential growth; euro area governance;

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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