 Studying Growth in the Modern Classical Approach: Theoretical and Empirical Implications for the Analysis of Potential OutputReview of Political Economy, 2015, vol. 27, issue 3, 282-307 Abstract: The main characteristics of the modern classical approach to growth are studied with particular reference to the notion of 'potential output'. In contrast to mainstream approaches, which consider potential output to be exogenous and supply-determined, it is here regarded as endogenous and path-dependent. A tentative analysis is carried out of the implications of such a conception in empirical research, with special reference to the effects of the crisis on potential growth. Mainstream estimation methods (especially those used by international institutions) are shown to be deeply influenced by theory, but also to provide dubious and puzzling results. Very different empirical results and policy implications may be obtained from the standpoint of the alternative theoretical framework provided by the modern classical approach. On this basis, the paper proposes that the long-term policy target should be set in terms of the rate of unemployment rather than potential output or potential growth. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:revpoe:v:27:y:2015:i:3:p:282-307 Ordering information: This journal article can be ordered from DOI: 10.1080/09538259.2015.1067366 Access Statistics for this article Review of Political Economy is currently edited by Steve Pressman and Louis-Philippe Rochon More articles in Review of Political Economy from Taylor & Francis Journals |
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