Canada's Potential Growth: Another Victim of the Crisis?
Electronic Access:
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Summary:
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.
Series:
Working Paper No. 2010/013
Subject:
Labor Labor force participation Labor productivity Potential output Production Total factor productivity
English
Publication Date:
January 1, 2010
ISBN/ISSN:
9781451962048/1018-5941
Stock No:
WPIEA2010013
Pages:
29
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