Following the Trend: Tracking GDP when Long-Run Growth is Uncertain

Ivan Petrella, Thomas Drechsel and Juan Antolin-Diaz

No 10272, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using a dynamic factor model that allows for changes in both the long- run growth rate of output and the volatility of business cycles, we document a significant decline in long-run output growth in the United States. Our evidence supports the view that this slowdown started prior to the Great Recession. We show how to use the model to decompose changes in long-run growth into its underlying drivers. At low frequencies, variations in the growth rate of labor productivity appear to be the most important driver of changes in GDP growth for both the US and other advanced economies. When applied to real-time data, the proposed model is capable of detecting shifts in long-run growth in a timely and reliable manner.

Keywords: Dynamic factor models; Business cycles; Mixed frequencies; Real-time forecasting; Long-run growth (search for similar items in EconPapers)
JEL-codes: C32 E01 E23 E32 O47 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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