Identifying the Sources of the Slowdown in Growth: Demand Versus Supply

Nicolò Maffei‐Faccioli

Journal of Applied Econometrics, 2025, vol. 40, issue 2, 181-194

Abstract: Long‐run GDP growth has declined in the United States over the past two decades. Two competing views take centre stage in accounting for this slowdown: the demand‐side view and the supply‐side view. I empirically quantify their relative importance in a Bayesian SVAR with common trends identified using sign restrictions. While supply‐side factors were the main driver of long‐run GDP growth prior to 2000, demand‐side factors explain half of its slowdown afterwards. The findings highlight the importance of demand‐side factors as drivers of long‐run growth.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:wly:japmet:v:40:y:2025:i:2:p:181-194

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