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Canada's Potential Growth :, Another Victim of the Crisis?, Marcello Estevão, Evridiki Tsounta

This study investigates the impact of the current financial crisis on Canada's potential GDP growth. Using a simple accounting framework to decompose trend GDP growth into changes in capital, labor services and total factor productivity, we find a sizeable drop in Canadian potential growth in the short term. The estimated decline of about 1 percentage point originates from a sharply decelerating capital stock accumulation (as investment has dropped steeply) and a rising long-term unemployment rate (which would raise equilibrium unemployment rates). However, over the medium term, we expect Canada's potential GDP growth to gradually rise to around 2 percent, below the pre-crisis growth rate, mostly reflecting the effects of population aging and a secular decline in average working hours
Table Of Contents
Contents; I. Introduction; II. Some Theoretical Considerations; III. Impact of Past Financial Crises on Potential; IV. Productivity Developments in the Canadian Business Sector; V. Canada's NAIRU; VI. A Simple Framework to Decompose and Project Potential GDP Growth; VII. Results; VIII. A Look at Past Canadian Recessions; IX. Conclusions and Policy Implications; References; Figure; 1. Canada: Potential Output Growth; Tables; 1. Path for Potential Output Growth Components; 2. Path for Potential Output Growth Components During Recent Canadian Downturn; Annex; 1. Data Sources
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (30 p.)
Specific Material Designation
Form Of Item

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