Growth Accounting: A European Comparison (original) (raw)

Assessing potential output growth in the euro area - a growth accounting perspective

For monetary policy purposes it is useful to apply a concept of potential output growth that looks through the fluctuations inherent in most model based estimates. Growth accounting can be a useful tool in this respect, given its focus on average developments in real GDP growth and supply side factors over medium to longer-term horizons. This paper describes the assumptions and measurement issues underlying the growth accounting framework and applies it to euro area data for the period 1980 to 2003. It shows that growth in measured total factor productivity has been the single most important contributor to real GDP growth over this period. However, the contribution to growth from this factor declined between the 1980s and the 1990s, while that from labour increased. Looking forward, the projected demographic developments imply a reduction in average real GDP growth in the coming decades unless compensation is achieved from other supply-side factors.

Assessing the Macroeconomic Performance of Greece in a Comparative Perspective

This paper uses growth accounting in order (i) to compare the long-run macroeconomic performance of three European countries (Greece, Ireland and Sweden) and (ii) to evaluate some possible factors that might account for Greece's relative income and labor productivity stagnation. Ireland and Sweden provide the basis of comparison as they are often seen by Greek policy makers as benchmarks of how well a relatively small country can do in the European Union. We find that Greece's relative stagnation is primarily due to Total Factor Productivity (TFP) differences. We argue that Greece's TFP gap is likely accounted for by the low degree of openness of the Greek economy.

Economic Growth in Greece: Past Performance and Future Prospects

2001

This Paper examines the past growth performance of the Greek economy and examines the outlook for future growth in light of the macroeconomic stabilization that was achieved over the last half of the 1990s and following Greece's admission to the Euro currency zone. The Greek economy performed very poorly over the quarter century from 1970 to 1995, during which it was the poorest country in the European Union. We develop a set of growth accounts that attribute part of the deteriorating performance to a falloff in capital formation, but the most dramatic factor is a sharp deterioration in multi-factor productivity, or the efficiency of the economy. Part of the explanation lies with the collapse of macroeconomic policy that took the form of large fiscal deficits and very high rates of inflation; but the Greek economy also fares poorly in other dimensions of its economic institutions, such as competitiveness of its tradable goods sectors, a highly constrained labor market, and a re...

Asymmetries in the euro area and TFP growth: evidence from three major European economies

Journal of Economic Studies, 2020

PurposeIn this paper, the authors study the long-run determinants of total factor productivity (TFP) in three major European economies over the period 1983–2017, namely Germany, France and Italy.Design/methodology/approachThe authors focus on the capital misallocation effects, scale effects and labor misallocation effects. To this end, the authors study how real interest rate shocks, real exchange rate shocks, real wage shocks and changes in labor regulation affected TFP in major European countries over the last decades. The authors employ a theoretical and an empirical model to investigate the issue. The empirical results are obtained using a VAR model for estimation.FindingsA stripped-down model of labor market in open economy with technology progress allows to identify the relevant variables affecting TFP. On the empirical ground, the authors find a positive relationship between TFP and real interest rate in the long run. Importantly, the authors detect a positive relationship be...

Decomposition of GDP growth in European countries; different methods tell different stories

The composition of economic growth can be analysed in two different ways. In the 'traditional method' for the decomposition of GDP growth, total imports are deducted from exports. This approach underestimates the importance of exports for the growth in GDP, and overestimates the importance of domestic expenditure categories.In the alternative methodology proposed in this paper, imports are allocated to all expenditure categories. Although this 'import-adjusted method' is more complex than the 'traditional method', it has the considerable advantage that the contributions of the expenditure categories to GDP growth provide a better understanding of why GDP growth decelerates or accelerates.The methodology for calculating the import content of final demand, and the implications for the decomposition of real GDP growth, are discussed. For six individual European countries and the euro area, the paper shows that applying the alternative methodology provides rather...

Sources of TFP growth in a framework of convergence-evidence from Greece

International Review of Applied Economics, 2012

The main hypothesis tested in the paper is whether technology is a conduit of productivity growth for a country that falls behind the frontier. Although the current analysis focuses on a country growth narrative, the evidence represents a pair of countries (i.e. Greece and Germany) that admittedly form the periphery and the core of Europe. The first lesson taken from the study is that for more than two decades the speed of productivity adjustment was rather low in Greece underlying a number of unobserved rigidities that exist both at the industry and the institutional level. Even though the speed of technology transfer is low, the adoption of foreign technology remains an important source of productivity growth. Other key findings are that productivity gains from trade exist but their full realization requires a substantial time lag. Additionally, the degree of trade openness improves absorptive capacity confirming the dual role of trade as recently stressed in the productivity literature. R&D activity is another productivity growth contributor but only through higher rates of innovation.

The Eurozone Debt Crisis and its Impact on E.U Member States Economic Growth: A Case Study of Greece

American International Journal of Research in Humanities, Arts and Social Sciences (AIJRHASS), 2016

The year 2002 would be remembered in the European Union as the year the ‘Euro’ officially became the common legal tender of the ‘Eurozone’ comprising presently of 19 member states. Exactly seven years after, a full blown banking and sovereign debt crisis was evident in the monetary union which raised fresh financial concerns the world over after that of the 2007-2008 global financial crisis. The Eurozone debt crisis that caught the international community by surprise, began with the shocking revelation on the humongous external debt hovering over Greece. Afterwards, the ballooning debt-to-GDP ratio of other peripheral states in the Euro Area - Italy, Ireland, Portugal and Spain surfaced thus giving rise to the acronym G.I.I.P.S in reference to the five indebted countries in the Eurozone. This paper therefore examines the sovereign debt crisis of E.U member states belonging to the Eurozone and the effect it has had on their economic growth. With Greece as the case study, the nature, causes and rescue packages so far adopted at salvaging the Eurozone debt crisis since 2009 till date were duly accounted for via an historical and empirical approach which was heavily dependent on secondary sources of quantitative data.

The growth performance and prospects in Europe: A Kaldorian approach

2004

This paper purports to apply the balance of payments constrainedgrowth model to explain the European growth performance in the last forty years and to discuss the likely prospects for the future. After a formal reconsideration of the long-run and short-run arguments supporting the validity of the PostKeynesian approach to economic growth, a simplified and an extended version of the basic model are outlined. The application of the model to the European experience shows that the so-called Thirlwall’s law performs quite well in explaining facts in all the decades under consideration. The fundamental reasons behind the unsatisfactory recent EU growth experience lie therefore in a decreasing (absolutely and relatively to other advanced countries) exports dynamics and in an increasing imports dependence. On the basis of the existing trends, the prospects for the future appear to be gloomy, unless structural reforms of the productive system are promoted in order to improve the position of ...