Transcript GDP gap

GDP growth and
resource utilisation
Saltsjöbaden
6 October 2011
First Deputy Governor
Svante Öberg
Summary
Resource utilisation can be measured in
several different ways, among others as
actual GDP in relation to potential GDP
(GDP gap)
 The financial crisis has lowered the
growth rate of potential GDP
 Resource utilisation is thus largely
normal, even though GDP is only slightly
higher than before the crisis

Outline
1.
2.
3.
4.
5.
6.
GDP growth over the longer term
The significance of resource utilisation for
monetary policy
The Riksbank’s calculations of potential GDP
The impact of the financial crisis on potential
GDP
Different measures of resource utilisation and
what they say about resource utilisation at
present
The need for continued analyses
1. GDP growth over the longer
term
1. Actual and trend GDP
Logarithmed levels
6.5
6.5
GDP
6.0
6.0
Trend
5.5
5.5
5.0
5.0
4.5
4.5
50
55
60
65
70
75
80
Note. HP trend derived solely from annual data 1950-2010.
85
90
95
00
05
10
Sources: Statistics Sweden and the Riksbank
2. Actual and trend growth
Annual percentage change
8
8
GDP growth
6
6
Trend Growth
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
50
55
60
65
70
75
80
Note. HP trend derived solely from annual data 1950-2010.
85
90
95
00
05
10
Sources: Statistics Sweden and the Riksbank
2. The significance of resource
utilisation for monetary policy



The target for monetary policy is to
hold CPI inflation at 2 per cent
The Riksbank also takes into account
high GDP, high employment and low
unemployment
Resource utilisation is also an
indicator of future inflation
3. Resource utilisation and inflation
Correlation betwen different measures of resource utilisation and
CPIF inflation, 0-12 quarters ahead
1.0
1.0
GDP gap (PF)
0.8
0.8
Hours gap (PF)
0.6
0.6
RU indicator
0.4
0.4
0.2
0.2
0.0
0.0
-0.2
-0.2
-0.4
-0.4
-0.6
-0.6
0
1
2
3
Note. Estimation period is 1997-2006.
4
5
6
7
8
9
10
11
12
Sources: Statistics Sweden and the Riksbank
3. The Riksbank’s calculations
of potential GDP
The production function approach



𝒀 = 𝑻𝑭𝑷 + 𝜶𝑲 + (𝟏 − 𝜶) 𝑯
𝒀 = 𝑻𝑭𝑷
𝟏
+ 𝑲
𝟑
𝟐
+ 𝑯
𝟑
𝑻𝑭𝑷 = 𝒀
𝟏
− 𝑲
𝟑
𝟐
− 𝑯
𝟑
4. Total factor productivity
Logarithmed levels
-3.3
-3.3
Actual TFP
-3.4
-3.4
TFP, forecast
Potential TFP
-3.5
-3.5
-3.6
-3.6
-3.7
-3.7
-3.8
-3.8
-3.9
-3.9
80
85
90
95
00
05
10
15
20
Source: The Riksbank
5. Capital stock
Logarithmed level
29.2
29.2
29.0
29.0
28.8
28.8
28.6
28.6
28.4
28.4
28.2
28.2
28.0
28.0
27.8
27.8
80
Note. Capital services
85
90
95
00
05
10
15
20
Sources: The OECD and the Riksbank
6. Number of hours worked
Logarithmed levels
12.2
12.2
Hours
Hours, forecast
Hours, potential
12.2
12.2
Hours, HP trend
12.1
12.1
12.1
12.1
12.0
12.0
12.0
12.0
11.9
11.9
80
85
90
95
00
05
10
15
20
Sources: Statistics Sweden and the Riksbank
7. Actual and potential GDP
Logarithmed levels
14.0
14.0
GDP
GDP, forecast
13.8
13.8
GDP, potential (PF)
GDP, HP trend
13.6
13.6
13.4
13.4
13.2
13.2
13.0
13.0
12.8
12.8
80
85
90
95
00
05
10
15
20
Sources: Statistics Sweden and the Riksbank
8. GDP gap
Per cent
6
6
GDP gap (HP)
4
4
GDP gap (PF)
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
80
85
90
95
00
Note. GDP gap (HP) refers to GDP’s deviation from trend calculated with a HP-filter.
GDP gap (PF) refers to GDP’s deviation from trend calculated with a production function.
05
10
Sources: Statistics Sweden and the Riksbank
9. Hours gap
Per cent
6
6
Hours gap (HP)
4
4
Hours gap
2
2
0
0
-2
-2
-4
-4
-6
-6
80
85
90
95
00
05
Note. Hours gap (HP) refers to the deviation of hours worked from trend calculated with a Hodrick Prescott filter.
Hours gap refers to the deviation of hours worked from the Riksbank’s assessed trend for hours worked.
10
Sources: Statistics Sweden
and the Riksbank
10. GDP gap, September and in real time
Per cent
6
6
4
4
September 2011
Real time
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
05
06
07
08
09
10
Note. September 2011 refers to the PF gap. Real time refers to the HP gap except from October
2010 and onwards when the PF gap is used.
11
12
13
Sources: Statistics Sweden and the Riksbank
4. The impact of the financial
crisis on potential GDP
8. GDP gap
Per cent
6
6
GDP gap (HP)
4
4
GDP gap (PF)
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
80
85
90
95
00
Note. GDP gap (HP) refers to GDP’s deviation from trend calculated with a HP-filter.
GDP gap (PF) refers to GDP’s deviation from trend calculated with a production function.
05
10
Sources: Statistics Sweden and the Riksbank



GDP growth 1995–2005: 3.1%
per year
GDP growth 2005–2011: 2.0%
per year
GDP 2011 about 6 per cent
lower than suggested by a
projection of 3 per cent per year
from 2005
5. Different measures of resource
utilisation and what they say about
resource utilisation at present
8. GDP gap
Per cent
6
6
GDP gap (HP)
4
4
GDP gap (PF)
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
80
85
90
95
00
Note. GDP gap (HP) refers to GDP’s deviation from trend calculated with a HP-filter.
GDP gap (PF) refers to GDP’s deviation from trend calculated with a production function.
05
10
Sources: Statistics Sweden and the Riksbank
9. Hours gap
Per cent
6
6
Hours gap (HP)
4
4
Hours gap
2
2
0
0
-2
-2
-4
-4
-6
-6
80
85
90
95
00
05
Note. Hours gap (HP) refers to the deviation of hours worked from trend calculated with a Hodrick Prescott filter.
Hours gap refers to the deviation of hours worked from the Riksbank’s assessed trend for hours worked.
10
Sources: Statistics Sweden
and the Riksbank
11. Capacity utilisation
Per cent, seasonally-adjusted data
100
100
Capacity utilisation in the manufacturing sector
95
95
Mean, 1996-2008
90
90
85
85
80
80
75
75
70
70
95
97
99
01
03
05
07
09
11
Source: Statistics Sweden
12. Employment rate
Percentage of population aged 16-64
85
85
80
80
75
75
Employment rate
70
70
Mean, 2000-2008
65
65
60
60
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
Source: Statistics Sweden
13. RU indicator and GDP gap
Standard deviation and percentage
6
4
6
GDP gap (PF)
RU indicator
4
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Note. The RU indicator has been normalised so that the mean value is 0 and the standard deviation is 1.
The reference period is 1996-2008. GDP gap according to production function (PF) approach.
Sources: Statistics Sweden
and the Riksbank
14. Actual and long-term
unemployment
Per cent of labour force aged 16-64
12
12
10
10
8
8
6
6
4
4
Unemployment
Unemployment, forecast
2
2
Mean, 2000-2008
Long-term unemployment
0
0
80
85
90
Note. Forecast refers to ages 15-74
95
00
05
10
15
20
Sources: Statistics Sweden and the Riksbank
15. Unemployment gap
Per cent
5
5
4
4
3
3
2
2
1
1
0
0
-1
-1
-2
-2
-3
-3
-4
-4
80
85
90
95
Note. Unemployment gap refers to the deviation between actual and
long-term unemployment in Figure 14.
00
05
10
Sources: Statistics Sweden and the Riksbank
16. Labour shortages
Percentage of companies, seasonally-adjusted data
50
50
Labour shortages
45
Mean, 1996-2008
45
40
40
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
96
98
00
02
04
06
08
10
Source: National Institute of Economic Research
17. Beveridge curve
Per cent
0.6
0.5
2008
2011
Vacancy rate
0.4
2007
2002
2001
0.3
2006
2003
2004
2010
2005
0.2
2009
0.1
0.0
5.0
5.5
6.0
6.5
Note. Years indicate the first quarter of each year.
7.0
7.5
Unemployment
8.0
8.5
9.0
9.5
Sources: Statistics Sweden and the Riksbank
Table 1. Resource utilisation, second
quarter 2011
Gap as percentage and RU indicator in standard deviation
GDP gap, HP
0.4
GDP gap, PF
-0.4
Hours gap, HP
0.3
Hours gap, PF
-0.8
Capacity utilisation¹
-0.3
Employment rate²
0.3
RU indicator
0.2
Unemployment gap³
-1.0
Labour shortage¹
2.3
¹Deviation from mean value, percentage points, 1996-2008
²Deviation from mean value, percentage points, 2000-2008
³Percentage points, reverse sign
6. Need for continued analyses




What determines the development of
productivity and potential GDP in
normal business cycles and in deep
recessions?
Particularly TFP
Combine the production function
approach and economic short-term
statistics
Use micro data
Thank you!