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April 2017 Annual Reassessment of Potential Output Growth in Canada
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April 2017 Annual Reassessment of Potential Output Growth in Canada

Author

Listed:
  • Andrew Agopsowicz
  • Bassirou Gueye
  • Natalia Kyui
  • Youngmin Park
  • Mohanad Salameh
  • Ben Tomlin

Abstract

This note summarizes the Bank of Canada’s annual reassessment of potential output growth, conducted for the April 2017 Monetary Policy Report. Potential output growth is projected to increase from 1.3 per cent in 2017 to 1.6 per cent by 2020. The lower estimate for potential output growth in the near term (relative to the 2016 assessment) largely reflects distinctly weak business investment over 2015 and 2016, as well as reallocation costs associated with the adjustment to lower oil prices. However, potential output growth improves throughout the projection as investment is expected to pick up, with an increasing share in productivity-enhancing machinery and equipment. Population aging will act as a drag on potential output growth, with a small offset coming from higher levels of immigration. An analysis of alternative scenarios suggests a range of potential output growth from ±0.3 percentage points in 2017 to ±0.5 percentage points in 2020.

Suggested Citation

  • Andrew Agopsowicz & Bassirou Gueye & Natalia Kyui & Youngmin Park & Mohanad Salameh & Ben Tomlin, 2017. "April 2017 Annual Reassessment of Potential Output Growth in Canada," Staff Analytical Notes 17-5, Bank of Canada.
    • Handle: RePEc:bca:bocsan:17-5
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    References listed on IDEAS

    as
    1. Lise Pichette & Pierre St-Amant & Ben Tomlin & Karine Anoma, 2015. "Measuring Potential Output at the Bank of Canada: The Extended Multivariate Filter and the Integrated Framework," Discussion Papers 15-1, Bank of Canada.
    2. Shutao Cao & Mohanad Salameh & Mai Seki & Pierre St-Amant, 2017. "Trends in Firm Entry and New Entrepreneurship in Canada," Canadian Public Policy, University of Toronto Press, vol. 43(3), pages 202-220, September.
    3. Lukas Albrecht & Trevor Tombe, 2016. "Internal trade, productivity and interconnected industries: A quantitative analysis," Canadian Journal of Economics, Canadian Economics Association, vol. 49(1), pages 237-263, February.
    4. Steve Ambler, 2016. "Ripple Effects: Oil Price Shocks and Monetary Policy," e-briefs 245, C.D. Howe Institute.
    5. Mary Amiti & Jozef Konings, 2007. "Trade Liberalization, Intermediate Inputs, and Productivity: Evidence from Indonesia," American Economic Review, American Economic Association, vol. 97(5), pages 1611-1638, December.
    6. Ulrich Doraszelski & Jordi Jaumandreu, 2013. "R&D and Productivity: Estimating Endogenous Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1338-1383.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kan Chen & Nathaniel Karp, 2018. "Natural interest rates in the U.S., Canada and Mexico," Working Papers 18/07, BBVA Bank, Economic Research Department.
    2. Dany Brouillette & Katerina Gribbin & Justin-Damien Guénette & James Ketcheson & Olena Kostyshyna & Jonathan Lachaine & Colin Scarffe, 2017. "A Canada-US Comparison of Labour Market Conditions," Staff Analytical Notes 17-4, Bank of Canada.
    3. Russell Barnett & Rhys R. Mendes, 2017. "A Structural Interpretation of the Recent Weakness in Business Investment," Staff Analytical Notes 17-7, Bank of Canada.

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    More about this item

    Keywords

    Labour markets; Potential output; Productivity;
    All these keywords.

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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