Potential Growth: A Global Database

Kilic Celik, Sinem and Kose, Ayhan M. and Ohnsorge, Franziska and Ruch, Franz (2023): Potential Growth: A Global Database.

Abstract

Potential growth—the rate of expansion an economy can sustain at full capacity and employment—is a critical driver of development progress. It is also a major input in the formulation of fiscal and monetary policies over the business cycle. This paper introduces the most comprehensive database to date, covering the nine most commonly used measures of potential growth for up to 173 countries over 1981-2021. Based on this database, the paper presents three findings. First, all measures of global potential growth show a steady and widespread decline over the past decade, with all the fundamental drivers of growth losing momentum over time. In 2011-21, potential growth was below its 2000-10 average in nearly all advanced economies and roughly 60 percent of emerging market and developing economies. Second, adverse events, such as the global financial crisis and the COVID-19 pandemic, contributed to the decline. At the country-level also, national recessions lowered potential growth even five years after their onset. Third, the persistent impact of recessions on potential growth operated through weaker growth of investment, employment, and productivity.

• Item Type: MPRA Paper
• Language: English
• Keywords: production function; filters; growth expectations; developing economies
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E37 - Forecasting and Simulation: Models and Applications; O - Economic Development, Innovation, Technological Change, and Growth > O2 - Development Planning and Policy > O20 - General

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