Prospects for growth in the Euro area

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Title: Prospects for growth in the Euro area
Authors: McQuinn, Kieran
Whelan, Karl
Permanent link: http://hdl.handle.net/10197/217
Date: Nov-2006
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
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
Other versions: http://www.centralbank.ie/data/TechPaperFiles/12RT06.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Research Collection

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