A Fresh Look at Potential Output in Central, Eastern, and Southeastern European Countries
IMF Working Papers, February 14, 2017
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- A Fresh Look at Potential Output in Central, Eastern, and Southeastern European Countries
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Bibliographic details
- Authors: Jiri Podpiera, Faezeh Raei, Ara Stepanyan
- Published: February 14, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475578980.001
Research question and methods
- Research question: Was the postcrisis growth slowdown in Central, Eastern and Southeastern Europe (CESEE) structural or cyclical?
- Methods used:
- Production function approach
- Basic multivariate filter
- Multivariate filter with financial frictions
- Sample and period:
- 18 CESEE countries
- 2000-15
Key findings
- Potential growth weakened significantly after the crisis across most countries in the region.
- The decline in potential growth appears largely due to:
- Stagnant productivity
- Weaker capital accumulation
- Common external factors associated with the decline include:
- Trading partners’ slow potential growth
- Decline in global trade
- Stalled expansion of global value chains
- Output gap estimates:
- Output gaps in 2015 were largely closed in many countries in the region.
Policy-relevant implications (inferred from findings)
- Policies aimed at restoring potential growth should address:
- Reviving productivity growth
- Supporting capital accumulation
- Mitigating adverse external developments from trading partners and global trade dynamics
- Reintegrating or leveraging global value chains where feasible
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- A Fresh Look at Potential Output in Central, Eastern, and Southeastern European Countries