Tracking the Slowdown in Long-Run GDP Growth

Juan Drechsel Antolin-Diaz · Thomas Drechsel · Iván Petrella

135 citations0/0 files storedThe Review of Economics and Statistics

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Economic Growth and Productivity Monetary Policy and Economic Impact Unemployment and Economic Growth

Abstract

Using a dynamic factor model that allows for changes in both the long-run growth rate of output and the volatility of business cycles, we document a significant decline in long-run output growth in the United States. Our evidence supports the view that most of this slowdown occurred prior to the Great Recession. We show how to use the model to decompose changes in long-run growth into its underlying drivers. At low frequencies, a decline in the growth rate of labor productivity appears to be behind the recent slowdown in GDP growth for both the United States and other advanced economies. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.

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References

2019American Economic Review 1997Postwar U.S. Business Cycles: An Empirical Investigation 1982Trends and random walks in macroeconmic time series 2005Time Varying Structural Vector Autoregressions and Monetary Policy 2002Forecasting Using Principal Components From a Large Number of Predictors 2015Measuring Uncertainty 1981A new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the ‘business cycle’1998Stochastic Volatility: Likelihood Inference and Comparison with ARCH Models

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