Should we still use the concept of potential growth ?

Catherine Mathieu (1) , Henri Sterdyniak (1)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)

The concepts of potential output level and growth survived the 2008 crisis and are still widely used in economic policy debates. The paperdiscusses thetheoretical foundations and empirical assessments of these concepts. Potential output may refer to different concepts, depending on the constraints taken into account. Potential output cannot be assessed without a complex macroeconomic analysis.The paper discusses recent empirical work on potential growth estimates,especially how they introduce a break in potential growth after the 2008 crisis, and how the methods used oftenjustify procyclical policies. For the future,the problem isnot a slowdown in potential growth butthe inability of developed economies,underglobalisation constraints, to reach afull-employment growth.

Mots clés: potential growth; euro area governance

Domaines: Economies et finances

Catherine Mathieu, Henri Sterdyniak. Should we still use the concept of potential growth ?. 2015. ⟨hal-03459550⟩