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Secular Stagnation: Policy Options and the Cyclical Sensitivity in Estimates of Potential Output

Olivier Coibion, Yuriy Gorodnichenko and Mauricio Ulate

No 01/2017, Working Papers from National Bank of Ukraine

Abstract: The fact that most of the persistent declines in output since the Great Recession have parlayed into equivalent declines in measures of potential output is commonly interpreted as implying that output will not return to previous trends. Using a variety of estimates of potential output for the U.S. and other countries, we show that these estimates respond gradually not only to supply-side shocks but also respond to demand shocks that have only transitory effects on output. Observing a revision in measures of potential output therefore says little about whether concurrent changes in actual output are likely to be permanent or not.

Keywords: potential output; output persistence; secular stagnation (search for similar items in EconPapers)
JEL-codes: E2 E3 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-05
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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