Canada's Potential Growth: Another Victim of the Crisis?
IMF Working Papers, January 1, 2010
Source details
- Canonical URL
- Canada's Potential Growth: Another Victim of the Crisis?
Other formats
Bibliographic details
- Authors: Marcello M. Estevão, Evridiki Tsounta
- Published: January 1, 2010
- Series: IMF Working Papers
Research question and methodology
- Investigates the impact of the current financial crisis on Canada's potential GDP growth.
- Uses a simple accounting framework to decompose trend GDP growth into changes in:
- capital,
- labor services, and
- total factor productivity (TFP).
Key findings
- Short-term potential growth:
- Finds a sizeable drop in Canadian potential growth in the short term.
- The estimated decline of about 1 percentage point originates from:
- sharply decelerating capital stock accumulation (as investment has dropped steeply), and
- a rising long-term unemployment rate (which would raise equilibrium unemployment rates).
- Medium-term outlook:
- Potential GDP growth is expected to gradually rise to around 2 percent.
- This medium-term rate remains below the pre-crisis growth rate.
- The lower medium-term potential largely reflects:
- the effects of population aging, and
- a secular decline in average working hours.
Subjects and keyword focus
- Subjects: Labor, Labor force participation, Labor productivity, Potential output, Production, Total factor productivity
- Keywords: Canada, equilibrium unemployment, financial crisis, Labor force participation, labor force participation rate, labor productivity, labor productivity growth, potential GDP, potential GDP growth, potential growth, Potential output, TFP, TFP contribution, Total factor productivity, trend TFP, WP
Marcello M. Estevão, and Evridiki Tsounta. "Canada's Potential Growth: Another Victim of the Crisis?", IMF Working Papers 2010, 013 (2010).