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Prospects for growth in the Euro area
Author(s)
Date Issued
November 2006
Date Available
10T15:44:55Z June 2008
Abstract
We review the recent performance of the Euro area economy, focusing in detail on the separate roles played by labour input, capital input, and total factor productivity (TFP). After a long period of catching up with US levels of labour productivity, Euro area productivity growth has, since the mid-1990s, fallen significantly behind. We show that this recent divergence has accelerated since 2000, and that this is mainly due to
the poor rate of Euro area TFP growth. Based on prevailing trends, we estimate that potential output growth in the Euro area currently may be running as low as 1.5 percent per year. In addition, if TFP growth stays at recent levels, the output growth rate will decline further due to weaker capital deepening. To consider future Euro area prospects for growth, we examine a set of alternative scenarios, each of which posits a potential increase in a determinant of output growth. One of these scenarios focuses on the potential effects of greater labour market deregulation.
Type of Material
Technical Report
Publisher
Central Bank of Ireland
Series
Central Bank Research Technical Paper
12/RT/06
Copyright (Published Version)
2006 Copyright Central Bank of Ireland
Subject – LCSH
Economic development--European Union countries
Industrial productivity--European Union countries
Labor market--European Union countries
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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