Potential Output Growth in Several Industrialised Countries: A Comparison

We develop a new version of the production function (PF) approach for estimating the output gap of the euro area. Assuming a CES (constant elasticity of substitution) technology, our model does not call for any (often imprecise) measure of the capital stock and improves the estimation of the trend total factor productivity using a multivariate unobserved components model. With real-time data, we assess this approach by comparing it with the HodrickPrescott (HP) fi lter and with a Cobb-Douglas PF approach with common cycle and implemented with a multivariate unobserved components model. Our new PF estimate appears highly concordant with the reference chronology of turning points and has better real-time properties than the univariate HP fi lter for suffi ciently long time horizons. Its infl ation forecasting power appears, like the other multivariate approach, less favourable than the statistical univariate method.

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A new production function estimate of the euro area output gap

Lemoine

Mazzi

Monperrus-Veroni

et al. 2009

Journal of Forecasting

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Potential output growth in several industrialised countries a comparison

Cahn

Saint-Guilhem

2009

Empir Econ

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Long term implications of the ICT revolution: Applying the lessons of growth theory and growth accounting

Oulton

2012

Economic Modelling

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How big a boost to long run growth can countries expect from the ICT revolution? I use the results of growth accounting and the insights from a two-sector growth model to answer this question. The use of a two-sector rather than a one-sector model is required because of the very rapid rate at which the prices of ICT products have fallen in the past and are expected to fall in the future. According to the two-sector model, the main boost to growth comes from ICT use, not ICT production. Even a country which has zero ICT production can benefit via improving terms of trade. In the long run, the falling relative price of ICT products boosts the growth of GDP and consumption by inducing faster accumulation of ICT capital. I quantify this effect on the long run growth rate of 15 European and 4 non-European countries, using data from the EU KLEMS database. The ICT intensity of production (the ICT income share) is much lower in many European countries than it is in the United States or Sweden. Nevertheless the contribution to the long run growth of labour productivity stemming from even the current levels of ICT intensity is substantial: about half a percent per annum on average in the countries studied here. Eventually, the ICT revolution may diffuse more widely so ICT intensity may reach at least the same level as currently in the U.S. or Sweden, which would add a further 0.2 percentage points per annum to long run growth.

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Potential Output Growth in Several Industrialised Countries: A Comparison

Cited by 5 publications

References 8 publications

A new production function estimate of the euro area output gap

A new production function estimate of the euro area output gap

Potential output growth in several industrialised countries a comparison

Long term implications of the ICT revolution: Applying the lessons of growth theory and growth accounting

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